Theon International Plc (THEON) Earnings Call Transcript & Summary

Hello, everyone. Thank you for joining us, and welcome to Theon International Plc First Half 2026 Earnings Call. [Operator Instructions]. I will now hand the conference over to Evangile Karatzia with Investor Relations. Please go ahead.

Good afternoon, ladies and gentlemen, and welcome to Sun's Half Year 2026 Results Conference Call. Thank you for joining us today. I'm Evangelia Karatzia, part of the Investor Relations team option. We are pleased to present you today with an overview of the first half of 2026. We will start with the period highlight by Christianos Hadjiminas, our Founder and CEO. Next, Philippe Mennicken, our Business Development Director and Deputy CEO, will present market sector and business sides that guide our strategy. Following that, Dimitris Parthenis our CFO, will present the financial performance. We will close the presentation returning to Christian to address our guidance and future outlook. The last part of today's session will be dedicated to your questions. At this point, I would like to invite Christian to take the floor.

Thank you, Envagelia. Good afternoon, everyone, and thank you for joining us today. We are once again pleased to present another strong set of results that reflect our growing momentum and in our view, demonstrates both the sectors promising prospects and especially the now expanded EUR 8 billion addressable market for Xeon and the potential for our business model and strategy that lies ahead. I will begin with the first half 2026 highlights as well as the strategic and business milestones achieved across the group in that period before handing it over to Philippe. Let's begin. The first half of the year has seen momentum built up for Theon, delivering strong financial performance while materially enhancing our strategic platform and positioning the business for continued growth. Starting with our financial performance. We generated record first half revenues of $248.7 million, representing growth of 35.4% compared to H1 2025. This growth was delivered alongside a 40 basis point expansion in our margin, maintaining our industry-leading profitability with an EBIT margin of 26.2% and despite ongoing portfolio expansion and acquisition integration. Order intake reached $232.5 million, demonstrating continued demand across our product portfolio and supporting a book-to-bill ratio of approximately 1.0 -- as usual, order activities weighted towards the second half of the year with stronger intake anticipated in Q4 due to the industry's normal seasonality while further acceleration is expected from early 27 onwards. Our backlog remains a key strength. Soft backlog stood at EUR 1.46 billion, complemented by EUR 902 million of contractual auction, which, of course, we believe they will mostly all of them exercised shortly, providing strong revenue visibility and underpinning a coverage ratio of 2.4x based on the upper end of our financial year 2026 revenue guidance. At the same time, we continue to diversify our product mix and broaden our platforms. Revenues from non-night vision products now account for approximately 15% and are expected to reach around 19% to 20% by year-end, reflecting the successful execution of our strategy to expand into high-growth optoelectronic markets. Overall, the first half of 2026 combined strong financial and commercial delivery with significant strategic progress. We have expanded our addressable market, strengthen our backlog and maintain industry-leading profitability, providing a strong platform for the remainder of 2026 and beyond. And again, I have to stress, it's very important for Fin to retain its credibility. And whatever we have promised so far throughout the last 3 years since we are in the public markets, we have delivered more than delivered, I should say, -- now to provide some further detail on our key strategic milestones. First half of 2026 was an important period in the continued evolution of Steel as we continue to expand our platform. The transaction partnerships announced in first half have led our addressable market almost doubling to about EUR 8 billion and marked our entrance into some of the fastest-growing areas of defense technology. The activities in this acquisition and integration domain for a company of our size can be simply assessed as a precedent without exaggeration. In May, we announced the acquisition of an 80% stake in Mario, marking an important step in our strategy to accelerate our entry into unmanned vehicle systems and establish a stronger presence in France. Preliminary engagement between [ fines ] and manuals business development and R&D teams have identified a range of identified potential commercial opportunities and technology synergies, which we expect to support future growth and innovation initiatives subject to the necessary approvals, state approvals, we expect the transaction to close in Q4 of this year. Furthermore, we also made a EUR 3 million minority investment in Twin Prime and AI venture in the U.S. alongside the agreement to establish a joint venture to develop, commercialize and deploy bespoke AI solutions. This helps to expand our footprint in the U.S. and provides Theon with direct exposure to the rapidly developing defense AI market. In June, we signed a memorandum of understanding with Safran to establish a joint venture focused on the design and production of gimbals for UAVs. Theon will control 51% of the venture with part of the production expected to take place in Greece. The goal of this JV with Safran is to establish itself as nothing less than the global leading gimbals company by the end of 2027. We believe with all the work we have done, this is an achievable target by the end of 2027. Last but not least, this joint venture is another evidence, and I would like to stress the importance of that of 1 of our strategic premises whereby film becomes a prime catalyst for European defense industry integration and especially for French and German and Greek Defense Industry integration. Finally, we announced our largest investment to date the acquisition of HGH for an enterprise value of approximately EUR 300 million. This is a significant strategic step for Theon, accelerating our entry into the counter UAV market and further broadening our technology portfolio. HGH has unique innovation capabilities and has developed proprietary software solution augmented with artificial intelligence. By leveraging HGH technological differentiation, feel will further strengthen its product portfolio and create additional value. Importantly, we expect the transaction to be margin accretive within the first year following closing, which we expect to be early Q1 of 2027. Together, these initiatives which were broadly unexpected by the market, that is the speed and its size as well, significantly broadened team's capabilities beyond our traditional markets marking accelerated entrance to UAVs, counter UAV, AI and additional ISR technologies while creating a substantially larger ecosystem for future growth through a significantly expanded addressable market. Following the strategic investment just outlined, our strategic focus is now firmly on successful integration and realizing synergies across our expanded platform while continuing to deliver strong organic commercial growth. Again, here, the speed of operational integration is unprecedented as it has started earlier even than Theon's obtaining approval as it may in cases, a integration has commenced while seeking final approvals and b, in other cases like copper and harder digital, the results have been swift and visible as we will be further explained in this presentation. Looking at organic growth, and 1 of our biggest opportunities is in the United States. In order to speed up the industrial [indiscernible] films in the United States, the company has commenced its investment in organic growth across distinct units in the East for man portable products in Virginia and West Coast for electrical platforms in Oregon, respectively, with an initial projected investment of about USD 30 million to be deployed over the next 2 to 3 years, including hiring new executives in product development NBD, which we have already commenced as well as building our production capacity. Now I would like to briefly address our investment in [ Exosite. ] This was a strategic investment and Ton has concluded that the stake it currently holds represents a sufficient, and I will stress the word sufficient move, given Exocet position as a key supplier to field. We, therefore, feel that this investment has run its intended course and now our focus turns to the partnership itself. As a result, Theon has paused the application process to pursue a Board seat and Theon potential ownership stake increase. Above all, we now eagerly look forward to working even more closely together with Exogen to capture new opportunities ahead. Let me remind you that Exogen is an excellent detector company, and Theon alongside to Exogen is an excellent end product company, always in the electrooptical fields. Following a very active M&A period, our priority is now firmly on integration execution. We are progressing with the expected closing of [ Mali ] and the finalization of the Safran joint venture before year-end, subject to the remaining regulatory approvals. But in the meantime, we're not sitting idle as management teams across the group remain fully focused on driving business growth and supporting customers. Our integration process is faced and disciplined with an initial focus on capturing business development and R&D synergies. Both aspects that, of course, take some time to to produce results, though we have seen much faster results so far in the acquired companies than us had anticipated. While formal integration activities remain limited until closing, our teams have already identified several attractive commercial and technology opportunities that we will pursue once the transactions are approved and completed. At the same time, we're working to optimize efficiency across the group by improving working capital management, adopting a common treasury management system across our entities and streamlining key processes. We're also reinforcing our group reporting capabilities to support a larger, more integrated organization, always with the priority to retain the entrepreneurial spirit, the same spirit that broad feel at its current position. Overall, having significantly expanded Theon's platform and capabilities, our focus is now on successfully integrating these businesses, realizing synergies immediately and converting the strategic value of our acquisitions into commercial growth and our operational efficiencies. Moving on to Slide 8, before I hand over to Philippe, I want to touch on our integration track record and, more specifically, our proven ability to deliver improved capacity and capability drive commercial growth and leverage technologies to co-develop with our partners. Starting with capacity and capability. We can evidence our ability here through the delivery of 3x production capacity increase at hard digital exactly as we have been announcing in the last 2 years since acquisition. Alongside, and this is very important, imatindensification tubes quality improving from 1,800 form to 2,000 phone. This is a very important quality improvement. Highlighting our commercial growth ability at Kappa revenue and profitability performance already ahead of our initial expectations and the group has secured a new contract of approximately EUR 30 million with support from Theon, taking the business above its initial financial year 2026 revenue target. Here, I would like also to add that we are very, very pleased, aside from the German operation of Kappa, we are very, very pleased with the capabilities of the Spanish owned entity by Kappa with a superior quality of its staff members and the results they produce, which allows us also to expand into Spain as well. Lastly, our core development and ability to leverage technologies can be highlighted by our partnership with SoCs, which is already translating into meaningful commercial opportunities. The co-development of the Flax stabilized multi system to be supplied to [ Rin ] metal is just one of a great example of this with an initial committed value in excess of EUR 40 million. Furthermore, I'm very pleased to tell you that there is strong demand for shoes products and services, especially in the Middle East. On the back of it, as we have already announced, Theon is proceeding to acquiring, exercising its option acquiring the majority of Soros. Overall, the progress across these businesses demonstrates our strong track record on post-merger integration. We're not simply adding new capabilities to the wider Theon group we're scaling them, improving performance and levering technologies of the wider group while generating new commercial opportunities. Here, I must add that those invested companies, including Marion HGH, our full of young entrepreneurial lead talent that Theon is already tapping in to take full advantage of. I'll now hand you over to Philippe, who will provide an update on the business and the wider defense market.

Thank you, Christian, and good afternoon, everyone. As briefly mentioned earlier, today, we will touch upon our recent activity as well as the overall market and sector drivers directing our steps. As I hope you have gleaned from our recent activity, we are at the forefront of a new wider market being created, and we have a clear outline of how we aim to lead in this battle field evolution. We listen to our customers' operational requirements, design products to provide armies with agile, smart tech capabilities and deliver cost-effective solutions, they need to provide them with the technical edge, enhanced awareness in the battlefield. While we maintain our focus on sold systems, 2026 has been a year where we, as expected, have seen rising interest by end users on drones and other related ISR products across land, sea and air. Leveraging our newly acquired companies, you can now see that we have built an ecosystem of portfolio companies, which have strengthened technological capabilities and provide us access to more domains and accelerated commercial traction in the wider market, creating the foundational layer in order to achieve our vision of becoming a global defense Optoelectronics champion. We will take a closer look at MARIO today since the transaction is now closer to closing. And as Christian mentioned earlier, some business and synergy opportunities have already been identified. Mario's role in our ecosystem is to expedite our growth into the evolving air domain. Based in France, Mario operates a similar asset-light business model to Theon and has built a strong reputation across the EU, delivering proven products deployed by major UAV programs. As usual, the incumbent management team will remain in place to continue MERIO's growth path, which they have delivered successfully over the past several years. As a quick reminder, we entered into binding terms in May of this year to acquire 80% of MERIO with 3 main strategic points driving the deal, strengthening Theon's product suite increasing our footprint in Europe and specifically France and marking our entrance into the drone market, combining capabilities with other group companies. With MERIO's competencies added to our arsenal, we strengthened Fin's air domain capabilities and enhance features across our wider ISR product range. We expect this investment to deliver several synergies for the group, including cross-selling opportunities and, of course, helping accelerate the joint venture with Safran. Touching on these synergies in more detail, we expect the investment to drive cost synergies for the entire group, while also helping drive growth for MERIO through access to our global network and R&D capabilities. Our operational base will also facilitate the scalability of MERIO's operations. Before our investment, MERIO already had a proven track record and a strong market position, which we expect to strengthen further as integration progresses, making its capabilities, market leading. For illustration purposes, we have put 3 peer companies on this slide, which are amongst the market leaders today in this field. What convinced us to invest was that MERIO had all the technical and engineering capabilities to rival its leading peers, but lacked the scale of operations, global reach, supply chain and the financial and human capital that Tom can now provide. As part of our group, we are confident Merio's capabilities will be amplified giving us a springboard to capture meaningful market share and become more competitive in this fast evolving field. Moving now to the market. We continue to see defense procurement in an expansion cycle with a significant growth opportunity for FIA. Global Defense spending reached USD 2.9 trillion last year and is growing quickly. With decades of underinvestment in defense continued to be rectified and budget and investments increasing globally. In our home market in Europe, we are seeing the fastest growth driven by nature readiness and commitment to defense program spending from NATO members. Outside of Europe, Army modernization programs are in progress across all regions with significant opportunities across APAC, the Middle East and the largest market globally in the U.S., where we have significant penetration headroom -- this expansion cycle has supported sector fundamentals improve and helped drive sustained growth, with average industrial revenue growth of over 20% over the last 12 months. Margins are growing faster than revenue, highlighting sustainable growth and the shift to long-term contracts is expanding backlog visibility end points to long-term demand. Theon continues to operate at the intersection of this growth and having continuously expanded our addressable market, we expect to benefit from structural growth across the board. Whilst we have expanded our addressable market through recent investments, we'd like to emphasize that the structural growth is being seen across the market. Major budget allocations are being said, as you know, for UAS and counter UAS systems, which we are targeting with our new ISR capabilities. But importantly, demand for soldier and manned portable equipment remains strong, especially in Europe. We see our largest opportunity in Europe, where continuous procurement and an increasing number of countries joining OCR are driving long-term structural growth in the region. At the same time, we do see countries that have already advanced on night-vision Google procurements moving into procurement cycles for night vision and thermal sites. Outside Europe, some procurement decisions in the Middle East and Far East have been somewhat delayed due to short-term budget pressures. Specifically for Middle East, there is a temporary shift in spending priorities towards drones counter drone solutions and air defense systems. Importantly, we view this as a timing related effect rather than changes in the underlying demand, while we are also able now to address these drone encounter drawn demands with our new ISR capabilities. The underlying requirements remain intact, and we expect these programs to progress and procurement activity to normalize towards the year-end into -- and into the first quarter of 2027. This reinforces our confidence in the order outlook and supports the 1x book-to-bill target we said from the outset of the year, reflecting both the resilience of demand in our core markets and our expectation that delayed programs will resume. Overall, we believe Theon is well positioned to capture the significant opportunities ahead, both within our traditional soldier solutions business and across our expanding ISR portfolio. I hope that gives you a clear overview of the opportunities that lay ahead for film. I'll now pass you on to Dimitris, who will dive into our financial performance in more details.

Thank you, Philippe. Let me start by turning to the financial performance for the first half of 2026. As you can see, we have maintained strong momentum through the first half, delivering continued growth alongside our best-in-class profitability. Revenue reached 248.7 million, up 35% year-on-year, reflecting the continued strength on the business and our ability to execute against the significant demand we are seeing across the markets. Importantly, we delivered this growth while preserving our industry-leading profitability. Adjusted EBIT increased by 38% to EUR 65.1 million, with the adjusted EBIT margin improving by 40 basis points to 26.2% compared with 25.8% in the prior year period. This performance remains firmly in line with our medium-term guidance, demonstrates the operating leverage embedded in our business model and reinforces Theon's ability to combine high growth with sustained best-in-class margins. Operationally, we continue to strengthen the group's performance in the first half. Harder digital delivers further improvements in both quality and output, while we moved quickly to build new capabilities in drones and artificial intelligence. Strategically, we also remained active on corporate -- on the corporate front. As discussed earlier, we made targeted investments to broaden our technology base and accelerate our expansion across ISR, drones, counter drone and AI capabilities, consistent with the strategic direction we have previously outlined. Taken together, H1 2026 was another period of strong execution, we delivered significant revenue and earnings growth, maintain market-leading margins and continued investing in the platform required to support our long-term growth ambitions. Moving on to the next slide. Our strong momentum continued through the first half with order intake increasing 38% to EUR 232.5 million and revenue growing 35% to EUR 248.7 million, of which 24.7% reflects organic growth. This represents a sustained book-to-bill ratio for approximately 1x, providing a solid foundation as we move into the second half. Importantly, alongside this growth, we are beginning to see the product mix evolve in line with our medium-term ambitions. Night vision remains the core of our business, but now relents approximately 85% of H1 revenue, while non-iXvision products have now grown to around 15%. This is an important development for field. As we have consistently said, our objective is now to move away from our leadership position in night vision. Rather, it is to build additional revenue streams alongside it, particularly across ISR and a broader digital and platform-based offering. That diversification is now beginning to come through in our H1 revenue mix, and we expect it to continue over time. From a geographic perspective, Europe remains our largest market, representing approximately 80% of revenue. The Americas contributed around 6%, while the rest of the world accounted for approximately 14%. This mix reflects particularly strong demand in Europe, while also highlighting the opportunity to continue to showing growth across our broader global footprint. Overall, we are delivering strong top line growth while progressively shifting the revenue mix towards the more diversified business we are building for the medium term. Turning to our backlog. We continue to benefit from very strong revenue visibility, which is increasingly expanding beyond our traditional 18-month horizon. At the end of June, soft backlog stood at approximately EUR 1.46 billion, comprising around EUR 1.2 billion of backlog and EUR 234 million of secured orders. In addition, we held approximately $902 million of options, bringing soft backlog plus options to approximately EUR 2.36 billion. This represents revenue coverage of around 2.4x and provides significant visibility over our longer-term growth trajectory, including approximately EUR 0.5 billion of backlog scheduled for delivery in financial year 2027. It also reflects the increasing weight of longer-term framework agreements and program-related orders within our order book. Moving to profitability. The first half again demonstrated the strength and scalability of our asset-light business model with earnings growing ahead of revenue. Adjusted EBITDA increased by 42% to EUR 70 billion with margin expanding by 130 basis points to 21.1%. Adjusted EBIT increased by 38% to $65.1 million, with the margin reaching 26.2%, maintaining our best-in-class profitability. This performance was supported by gross margin expansion, disciplined cost management, operating leverage and an improving product mix. Importantly, profitability remained resilient despite the step-up in acquisition activity and the consolidation of new businesses. Finally, net income more than doubled to EUR 74.3 million. For clarity, this increase reflects both underlying profitability growth and a fair value gain on financial assets. Turning now to Slide 21. I will touch on the investments we are making to support future growth. We are deliberately increasing expenditure to support the next phase of growth, both through additional capacity and the development of new products. CapEx increased to EUR 11.8 million in H1, equivalent to 4.7% of revenue, primarily reflecting organic expansion in Belgium and the accelerated capacity ramp-up at Harder Digital during this period. At the same time, expensed R&D increased to $5.6 million or 2.3% of revenue as we accelerated the introduction of new products to capture growing demand across adjacent categories. This also includes work to qualify new materials and further reduce reliance on critical minerals. These increases in CapEx and R&D remain in line with our guidance and reflect the investment required to support films growth trajectory while expanding both our capacity and future product pipeline. Turning to cash generation. Underlying performance remained strong in the first half despite the expected seasonal investment in working capital ahead of second half deliveries. Net working capital absorption improved to 40% adjusted to reflect prepayments related to recently announced investments. While this ratio remains above our medium-term target of approximately 35%, we expect this working capital investment to unwind as deliveries progress through the following quarters. Cash conversion remained robust at 83.2% with a modest year-on-year reduction largely reflecting the CapEx acceleration discussed on the previous slide. Importantly, operating cash flow increased to EUR 30.7 million despite near-term working capital headwinds supported by strong underlying profitability. Overall, the business continues to demonstrate strong underlying cash generation while investing in the working capital and capacity required to support our growth trajectory. Moving to the next slide. Theon remains well funded with substantial financial flexibility to support the group's growth ambitions. Our financing structure comprises of EUR 400 million revolving credit facility issued in October 2025, with a 5-year tenure alongside a new EUR 325 million 5-year term loan signed in September 2026. Both facilities were secured on highly competitive pricing terms. As a matter of fact, the new term loan was agreed on even stronger terms than the RCF, underscoring the continued support of our global banking partners. Together, these facilities provide a strong and flexible funding position with no near-term need to raise additional capital to support our strategic growth plans. Building on that funding position, I would like to briefly address how we expect leverage to evolve over the coming years. Following completion of the HGH and MERIO transactions, pro forma leverage is expected to rise temporarily to approximately 3 times, while this is above our target of below 2.5x EBITDA, these investments are supported by clear strategic rationale. We also have a clear deleveraging path supported by continued revenue growth, successful integration of the recently acquired businesses, operating leverage and stronger cash generation. On this basis, we expect leverage to return below 2.5x our EBITDA during 2027 and fall below 2x in 2028. In addition, we retain further flexibility through our liquid financial assets. If monetized, these assets would reduce pro forma leverage to below 1x in 2027 and below 0.5x in 2028. This can also be achieved without necessarily relinquishing our ownership on these assets. Let us also not forget that all these minority investments are now generating capital gains. Taken together with the funding structure outlined on the previous slide, this gives us confidence in our balance sheet position and our ability to fund growth while maintaining appropriate leverage. I will now hand back to Christian, who will present our revised guidance and wrap up today's call before we move to Q&A.

I hope it's clear the progress we have made this year. A lot more than announced has been going on in Theon internally in preparation of integration, looking at the future, which cannot be reflected in announcements. That's why I know internally, we're extremely proud, but now the work doesn't stop here. On that basis and under the frame that Theon always will remain conservative in its estimates and prefers to surprise the markets on the positive side rather than the negative side, we would like to say that, first, we'll maintain our guidance with confidence towards the $600 million target of revenues for this year. We are providing though an update to our margin guidance with increased confidence in our operational efficiencies and expected synergies to come through more recent investment, we can be clear that we expect our adjusted EBIT margin to be at least 26% in not just this year, but over the medium term. I believe this is important also in the context with very legitimate skepticism all these years, whether we can maintain our profit margins given the increase in revenues. Well, it seems that we have again managed to to overcome this scepticism and deliver results like this one where the margins are increasing, while revenues are also increasing. Overall, this reflects confidence in both our operational momentum for financial year 2026 and our medium-term ambition to continue building Theon in to a larger, more diversified global defense technology leader in the electro optical segment of the market, which is about EUR 8 billion, I repeat, I hope we have not only provided you evidence and confidence in that we do what we say we will, but have clearly also outlined the growth opportunities ahead of silver the coming years. With that, now it is time for your questions.

[Operator Instructions]. I will now hand the call back to management to begin. Please go ahead.

Thank you, Tracy, and thank you, Christian. We have received a few questions already. The first one, door medium-term organic growth target of 15% include HGH and MERIO.

No. As we have already guided, we expect a 15% annual growth which is going to be complemented by acquisitions such as the 1 of change and MERIO. So no, the answer is no. This is not included.

Okay. The next question by early 2027, till we have completed a series of acquisitions and over the last 2 years, including cartedigital, Capa, MERIO and A and minority investment in several other companies. For these companies, where you have majority control, do you have any plans to use a centralized ERP system to optimize group level working capital needs and inventory levels?

Sure. As a matter of fact, the plan is to centralize a lot of our functions. Finance is one of them. ERP is another one. This is going to help us move on more efficiently in integrating the companies that we have acquired.

Moving to next question, as your sales mix evolves with rising revenue contribution of thermal ISR and platform ophthalmic businesses. Where do you see your net working capital sales trend evolving? Is client advanced ratios in platform atomics, ISR contracts higher.

Well, we typically anticipate that as we move on to orders from areas such as ISRs on platforms, which relate to more long-term contracts from primes such as Ranmetal, for instance, which is our customer. We expect that advanced payments are going to be paid. We don't know however how soon this will impact our net working capital.

Okay. Great. Conversion of budget revenue, importation supply botnet remain a key investor concern for defense companies. Within our optronics ISR segment -- what has been your experience so far in terms of potential risk to your components applied while extending supply contracts for IIT with exercise coverage component demand in vision government. How confident do you feel about supply resilience for your platform of tonic, thermal and ISR businesses.

Okay. There are several questions here. This is Christianos Hadjiminas, I'll try to answer as many as I can. First of all, let's -- the backlog to revenues -- we don't see any bottlenecks. We are also in the platform business. We don't see any bottlenecks on supply. Of course, -- this is easy to say because we are -- at this stage, we are at low levels of sales because we just started with Kappa and other products we have. So we don't see any major or any sign of threat down the road. The major threat was in the past on tubes, we have addressed that by the expansion of capacity by Exons, which and also in harder Digital, which went in line with the demand. Again, we have to calibrate and not expand capacities before the demand is there. What else. Yes. That's basically it. And maybe, Dimi, do you want to answer the...

No, no, it's okay.

If I may add here, any potential supply issues on the ISR business, obviously, we're looking already into this. We do not see any at the moment. But obviously, we're always proactive to make sure that we have similar agreements like we have with Exacense for other critical components on the platform side. that even when the demand goes up, that we are still worth profit of course.

Thank you, Philippe. Moving on to the next question with regard to Exogen. Exogen are planning to 3x increase thermal camera production in 2026. How much of a competitive threat does expose.

First of all, the thermal camera production, we're very happy for exercise because what we are advancing is an end product. It's the gimbals. And the thermal camera is just a component. So we will be very happy, and we are talking to excess as we talk to other suppliers to get proper support like we get from Exocense on the tube side.

Can you give us -- can you provide us with an update on your efforts in getting a BDC excise?

Yes. I think that was covered. We paused the process because we realize that there's no need for that. No need to increase and no interest to increase our stake in Exocense. And at the same time, we realized there were so many applications to be done in various jurisdictions that it would draw down on management time and it was a mute point by now since we don't plan to increase our our equity stake in Exocense and also regarding the Board of Directors given the -- what happened in the last 6, 12 months where we have strengthened our relationship with Exocense. This may have caused problems for conflicts of interest although that could have been addressed as well, but there was no need for all this complication. Our relationship with Exocense is better than ever. I repeat, ExoSense is a very good detector company, and we are a very good end product company. And that's -- these are the highways where we work together partly.