Titomic Limited (T04.F) Earnings Call Transcript & Summary

Ladies and gentlemen, I've been informed that there is a quorum present, and as it is now 9:00 a.m., I declare this Annual General Meeting of Titomic Limited open. I welcome you to this virtual meeting. My name is John Frewen, non-Executive Director of Titomic Limited. I will be deputizing for our Executive Chairman, Dag Stromme, who is unable to attend today's meeting. Firstly, I would like to thank you for your interest in and support of the company. I would now like to introduce our CEO and Managing Director, Mr. Jim Simpson, and the other member of the Board in attendance, Mr. Humphrey Nolan. Dag Stromme, Mira Ricardel, Jim Chilton and Trey Obering, our apologies today due to time zone constraints and other commitments. Our CFO and Company Secretary, Geoff Hollis, is also online. I would also like to welcome Billy Chan, a representative of the company's auditor, RSM Australia Partners. Given this is a virtual meeting, I want to run over some housekeeping matters before we commence the formal business. At this meeting, there will be 6 items of business, including 5 resolutions. Each resolution will be proposed and voted on as a simple majority to be carried. Today's meeting is being held virtually online via the Computershare platform. This allows shareholders, proxies and guests to attend the meeting virtually. All attendees can watch a live webcast of the meeting. In addition, shareholders and proxies have the ability to ask questions and submit votes. Voting today will be conducted by way of a poll on all items of business. In order to provide you with enough time to vote, I will shortly open voting for all resolutions. At that time, if you are eligible to vote at this meeting, resolutions will appear within the vote tab. Selecting this tab will bring up a list of resolutions and present you with voting options. To cast your vote, simply select 1 of the options. There is no need to hit or submit or enter button as the vote is automatically recorded. You do, however, have the ability to change your vote up until the time I declare voting closed. I now declare voting open on all items of business. Please feel free to submit your votes at any time. I will give you a warning before I move to close voting after the items of business. [Voting]

Online attendees can submit questions at any time to ask a written question, select the Q&A icon, type your question into the text box. Once you have finished typing, please hit the send button. A copy of your submitted questions can be viewed by selecting my messages. To ask a verbal question, please follow the instructions written below the broadcast. Please note that while you can submit questions from now on, I or Geoff Hollis will not address them until the relevant time in the meeting. Please also note that your questions may be moderated or if we receive multiple questions on 1 topic, amalgamated together. Finally, due to time constraints, we may run out of time to answer all your questions. If this happens, we will answer them in due course. I will now have Jim Simpson reflect on some of our recent progress and provide a brief presentation on Titomic and why we are uniquely positioned. Jim will also provide some insights regarding what we anticipate for the near future. Jim?

I hope you can hear me now. Good morning, and thank you for joining us. I want to begin with a straightforward message where Titomic stands today. We have made substantial progress over the past 12 months and the strategic pivot we began several years ago is working. Titomic is increasingly moving beyond being viewed simply as a cold spray technology company. We are becoming an advanced manufacturing company focused on solving some of the most difficult production problems of the supply chain and sustainment challenges facing aerospace, defense, maritime, space, energy and industrial customers. For many years, much of our activities centered around research and development, demonstrations and improving what technology could do. Today, an increasing portion of our activities focus on qualification, lowering initial production and ultimately, recurring production. That is the transformation we are working towards. Can we go to the next chart, please? Well, I'll just keep going. The recent progress slide contains a great deal of activity, but there is 1 theme behind virtually everything on it. Customers are moving Titomic further down the commercialization pathway. Across defense, aerospace, energy and government we are progressing from demonstration to qualification and from qualification toward production and recurring revenue. One of the most significant changes this year has been the level of engagement we are seeing from the U.S. defense and industrial base. We have hosted representatives from virtually every major U.S. aerospace and defense prime at our Huntsville facility. The companies are not coming simply to see cold spray, they're kind because they have a real manufacturing problems, capacity constraints, long lead times, shortages of forgings and castings, difficult materials, aging infrastructure and rapidly increasing demand for missiles, munitions, space systems and other critical products. Increasingly, they see Titomic as part of the solution. One of our biggest issues right now in the United States and across the world, is demand is outstripping existing manufacturing capacity. The market backdrop is particularly important across the missiles and munitions industrial base. Demand is growing materially faster than the legacy manufacturing system was designed to support. In virtually every missile program we are engaged around the primes are being asked to contemplate production increasing of 600 units per year to approximately 2,200 units per year. This is for each missile program. The exact requirement varies by program, but the scale of the requested ramp is a key point. In many cases, industry is being asked to increase output by as much as 3x or more. The level of growth cannot be solved simply by asking existing supply chain to work harder. It requires additional manufacturing capacity, alternate supply pathways, automation, new materials approaches and importantly, hybrid manufacturing. This is where Titomic's opportunity becomes much larger than cold spray alone. We can combine Titomic Kinetic Fusion with forgings, machinings and other traditional manufacturing processes to remove bottlenecks, reduced material requirements and shortened lead times and add capacity where conventional industrial base is constrained. We do not need to replace every conventional manufacturing process. We need to identify where Titomic Kinetic Fusion creates the greatest economic and production advantage and integrate it into the broader manufacturing architecture. A particularly important milestone was the visit to our Huntsville facility by the Honorable Michael Duffy, Undersecretary of War -- the Undersecretary of War for acquisition and sustainment. The significance of the visit was not simply the seniority of the visitor, the discussion centered about the ability to manufacture predictable products at speed in volume, precisely the problem the U.S. defense industrial base is trying to solve. We are working with technical organization -- his technical organization called Wire, on approaches to hybrid manufacturing and combining advanced manufacturing processes such as Titomic Kinetic Fusion with traditional machining, automation and other manufacturing technologies. The objective is not additive manufacturing for [ the sale's ] sake, it is to determine the best manufacturing architecture for producing critical hardware faster, at scale and with predictable quality. Potential application span space, missiles, hypersonics and other critical systems. As part of showing how we are affecting that, we secured the largest U.S. government contract in Titomic's history, the approximately USD 5 million high-pressure cold spray system awarded Tinker Air Force Base. We have now completed the program kickoff, and this is strategically important because it demonstrates something beyond the value of a single machine sale. It demonstrates that Titomic technology is moving into the infrastructure of the U.S. defense industrial base and into an operational sustainment environment. Another example is hypersonics. We are collaborating with a major defense prime on a novel approach to hypersonic leading edge structures. In July, that technology was subject to an extraordinary demanding combination of temperature and aerodynamic conditions. The results supported moving forward with the program, which we're quite frankly, very excited about. For Titomic, this is important because refractory materials and hypersonic structures represent exactly the kind of manufacturing challenge that our technology can create differentiated value. The difficult materials, complex geometries, demanding environments and limited traditional manufacturing capacity drives us into what we can do with Kinetic Fusion. This is no longer simply a laboratory discussion. It is an active qualification pathway right now. As far as missiles, munitions and space, the same progression is occurring here. We are currently in discussions or negotiations regarding warhead casings, pressure vessels, thrust chambers and missile components with major aerospace and defense companies. These are applications where the conventional supply chain is increasingly constrained. The production rate challenge I mentioned earlier, programs being asked to move from 600 units annually to 2,200 makes alternative and complementary manufacturing pathways increasingly important. Our focus is, therefore, on hybrid manufacturing solutions that can increase capacity, reduce material requirements, shorten lead times and relieve specific bottlenecks while retaining the processes that already work well. Our work with NASA is also expanding. We have signed a Space Act Agreement and are working on applications, including repair or cryogenic structures and tanks. We have also initiated work around NASA Standard 6030, an important step in building the qualification framework necessary to support future civil space and defense production programs. Again, the common denominator is qualification. We are deliberately building the technical evidence, process, quality systems and manufacturing controls required to transition from promising applications into repeatable production. Enable repair and sustainment, the sustainment side, the business is progressing well. We have participated in the competitive U.S. Navy exercises involving repair of components to the infrastructure on aircraft carriers and Titomic's technology performed successfully. We are now manufacturing new hardware per the requirements of NASA and keeping other existing hardware operational. The navies, the armies and Air Forces around the world operate an extraordinarily expensive assets that increasingly remain in service well beyond their original design lives. Being able to repair rather than replace components in a shipyard, depot and potentially closer to the operational environment can materially improve availability while reducing cost and lead times. The investment thesis, the reindustrialization of the capacity gap. The structural market need is clear, persistent lead times, aging fleets, fragile global supply chains and rapidly increasing requirements for the defense production. There is an enormous investment taking place today in defense capacity, but capital alone does not solve that problem. If everyone simply buys more of the same machines and manufacturing components using the same process, many of the existing bottlenecks remain. We believe advanced manufacturing must become part of the answer. That means determining where technologies such as TKF can complement existing manufacturing and create additional capacity. This is the role we intend Titomic to play in the reindustrialization of U.S. and allied manufacturing base. Why does Titomic win? What is -- it's very simple. It's cost, speed, resilience, scale and predictability. Our value propositions can ultimately be reduced to 5 things: cost, less material waste and opportunities to repair rather than replace; speed, fabrication repair measured in weeks rather than months in suitable applications; supply chain resilience, additional domestic and allied manufacturing pathways; scale, automation and robotics that enable throughput to grow without equivalent linear growth and labor; and predictability, repeatable manufacturing processes and qualified products that customers can rely on at production rates. Our investment in automation, robotics, process control qualifications, digital manufacturing is, therefore, just as important as our deposition speed. Our objective is not simply to make parts quickly is to make qualified predictable parts quickly and repeatability for production scale. Our international expansion in NATO, Europe and Australia, although the United States represents a major growth opportunity, this is not exclusively a U.S. strategy. In Europe, we are in final discussions regarding additional machines supporting NATO-related requirements, including efforts associated with Ukraine. We are also seeing opportunities arising from the offset in industrial participation requirements of major U.S. primes, particularly through our Netherlands operation. This gives Titomic an unusual strategic footprint. We can -- to support U.S. primes domestically while also helping them establish allied manufacturing capability closer to their international customers. Australia remains an important part of the global capability. We continue to work with Gilmour Space, Australian defense organizations and the oil and gas sector on applications ranging from advanced coatings to complex manufactured geometries. First Production programs, which is evidence of our transition. One of the milestones I particularly want to share to the shareholders is to recognize that we are now beginning to see the transition we have discussed for the last couple of years. Our First Production program has emerged from the semiconductor sector. That is significant, not simply because of revenue, but it demonstrates the progression from research and development, risk reduction, qualification, to low rate initial production now to production. That same progression is now occurring across multiple defense and aerospace programs, and that is why 2026 is different from our previous years. Titomic's been its early years developing a proving the underlying technology. We subsequently repositioned the business, as we've talked about earlier, established in the U.S. strategy built at Huntsville capability and are increasingly focused on the company on defense and industrial production. 2026 is a commercial inflection point, prime and government validation, low-rate initial production pipeline and major production opportunities are progressing. The message is simple, we are no longer trying to move cold spray works, we are industrializing it. As we move forward towards production, the company itself has also evolved. Our proposed U.S. redomiciliation is progressing well. We are currently expect the process to be completed by the end of the year. We are also progressing in steps necessary for our Huntsville operation to support classified programs, which we expect to occur over approximately the next 9 months. Those initiatives are administrative -- are not administrative exercises. They are part of the building of the corporate security, quality and manufacturing infrastructure required to participate in increasingly important U.S. defense programs. We currently have a portfolio of approximately 13 significant conversion programs representing management's illustrative potential of approximately $250 million to $430 million plus through 2030. These numbers are -- these numbers should not be interpreted as contracted backlog or revenue forecast, they represent the potential value of the program is currently progressing through different stages of our commercialization pipeline. What matters is not the absolute number, what matters is the quality and the maturity of the pipeline. The portfolio now includes programs moving through customer qualification, prime and government validation, proposals, risk reduction, pilot programs and low rate initial production towards production. The USD 250 billion to $430 million opportunities is, therefore, best viewed as the potential economic consequence of successful program conversion execution, not the starting position of the investment case. In other words, what I'm trying to say here is that we have actually done an expected value version of this. This is not the amount that we have in the pipeline, which is significantly larger. So in closing, if there's 1 message I'd like the shareholders to take away, it is the pivot is working. We spent years developing the technology. We then repositioned the company around the markets where that technology could solve important industrial problems. We've built the infrastructure. We established the customer relationships and during the past year, we have increasingly seen those relationships turn into qualification contracts and production opportunities. There is still substantial execution ahead of us. Qualification must become production, opportunities must become contracts and contracts must become predictable recurring revenue. But we are no longer asking whether Titomic's technology has a role in the future of advanced manufacturing. Our customers are increasingly telling us where they want us to apply it. Our job is now to execute, to qualify, industrialize and scale. That is the transition underway at Titomic, and that is why the progress made during 2026 is so important. Bottom line, the pivot is working, the market needs additional manufacturing capacity in many missile programs, primes are being asked to contemplate production increases from 600 units to 2,200 units and Titomic is moving from R&D and risk reduction through qualification into long rate initial production, and our job is now qualify, industrialize and scale. I want to thank you.

Thanks, Jim. I will now move on to the formal business of the meeting. Item 1, annual financial statements. This item requires us to receive and consider the annual financial report of the company for the 6 months ended 31 December 2025, together with the remuneration report, directors' declaration and the reports of the directors and company auditor. I reiterate, as announced on 18 November 2025 that the company changed its financial year end from 30 June to 31 December to align its reporting dates with its United States and Netherlands-based subsidiaries. The annual financial report of the company for the financial year ended 31 December 2025 accordingly covers the 6-month period from 1 July to 31 December 2025. There is no requirement for shareholders to vote on these reports. I will now ask Mr. Hollis if any questions or comments have been submitted online in relation to Item 1 to the management or the auditors of the company.

No, there are no questions, John.

Thank you. The next 5 items of business require a shareholder vote and will be conducted by an online poll, as previously mentioned. Item 2, Resolution 1, adoption of remuneration report. Item 2 is to consider and if thought fit to pass the following resolution as a nonbinding ordinary resolution, that the company adopt the remuneration report for the 6 months ended 31 December 2025 in accordance with Section 250R2 of the Corporations Act. Please note that a vote on this resolution is advisory only and does not bind the directors or the company. The Board abstains from making a recommendation in relation to this resolution. There is a voting exclusion on this resolution. The key management personnel as set out in the company's annual report and their closely related parties must not vote on this resolution. An exception to this prohibition exists where the person is exercising a directed proxy which specifies how the proxy is to vote on the proposed resolution on behalf of someone other than the key management personnel or the closely related party. The key management personnel or a closely related party that is appointed as a proxy must not exercise the proxy on a resolution connected directly or indirectly with the remuneration of a key management personnel if the proxy is undirected. That is, if the appointment does not specify the way the proxy is to vote on the resolution. However, the prohibition will not apply if the person is the Chairman of the meeting at which the resolution is voted on and the shareholder expressly authorizes the Chairman to exercise the proxy even if the resolution is connected directly or indirectly with the remuneration of the key management personnel of the company. I report that the valid proxies received in advance of the meeting are displayed on the screen. The results of the voting for this resolution will be released to the ASX after the conclusion of the meeting. I will now ask Mr. Hollis if any questions or comments have been submitted in relation to Item 2 of the management of the company.

There is 1 question, John, from Mr. Stephen Mayne. If our redomicile is successful, 1 of the Board's plans in relation to putting a remuneration report up for the vote every year as it occurs under the Australian law. I can field this just as by way of background for the shareholders on the call, there are numerous changes in governance and law of being a U.S. company versus applying to our Australian Corporations Act and the remuneration report is just 1 of them we are working through quite a huge list of those various changes. And we are yet to determine it to be remiss to me due to who put forward recommendation, but we are yet to determine all of those outcomes yet. We are working through the list. We'll be ready to go once the scheme meeting occurs later in the year. There's no other questions, John.

Thanks, Geoff. I now remind you to register your online vote either for or against in relation to Item 2, concerning the approval of the company's remuneration report. Item 3, Resolution 2, election of Lieutenant General Henry "Trey" Obering. Item 3 is to consider and if thought fit to pass the following resolution as an ordinary resolution, that for the purposes of the company's constitution and for all other purposes, the Lieutenant General Henry "Trey" Obering being eligible, be elected as a Director of the company. The directors of the company, other than Lieutenant General Obering recommend that shareholders vote in favor of this resolution. I report that the valid proxies received in advance of the meeting are displayed on the screen. The results of the voting for this resolution will be released to the ASX after the conclusion of this meeting. I will now ask Mr. Hollis if any questions or comments have been submitted in relation to item 3 to the management of the company.

I have 1 question, John, from Mr. Stephen Mayne. I'll direct this 1 to Jim Simpson. Did we use a recruitment firm to source Trey Obering and did you know any of our directors before engaging with us?

So Trey happens to have known Mira Ricardel. He also knows me. So yes, we did know him before electing him as a board member.

He was initially on our strategic advisory group as well.

Yes, he was part of our senior advisory group. Trey, in case you didn't know, was the head of the Missile Defense Agency. He is also 1 of the key consultants on the Golden Dome program. He was a senior executive at Booz Allen Hamilton. He's 1 of the most respected former generals that we have and is well respected by everyone in the aerospace and defense community.

Thanks, Jim. I now remind you to register your online vote either for or against in relation to Item 3, concerning the election of the Lieutenant General Obering as a director. Item 4, Resolution 3, reelection of Mr. Dag Stromme. Item 4 is to consider and if thought fit to pass the following resolution as an ordinary resolution. That, for the purposes of ASX Listing Rule 14.4, Clause 20.3 of the constitution and for all other purposes, Mr. Dag Stromme, who retires in accordance with the constitution and being eligible, offers himself for reelection, be reelected as a Director of the company. The directors of the company, other than Mr. Stromme, recommend that shareholders vote in favor of this resolution. I report that developed proxies received in advance of the meeting are displayed on the screen. The results of the voting for this resolution will be released to the ASX after the conclusion of the meeting. I will now ask Mr. Hollis if any questions or comments have been submitted in relation to Item 4 to the management of the company.

No questions, John.

Thanks, Geoff. I now remind you register your online vote either for or against in relation to Item 4, concerning the election of Mr. Stromme as a director. Item 5, Resolution 4, reelection of Mr. Humphrey Nolan. Item 5 is to consider and if thought fit to pass the following resolution as an ordinary resolution. That for the purposes of ASX Listing Rule 14.4, Clause 20.3 of the constitution and for all other purposes, Mr. Humphrey Nolan, who retires in accordance with the constitution and being eligible, offers himself for election, be reelected as a Director of the company. The directors of the company, other than Mr. Nolan recommend that shareholders vote in favor of this resolution. I report that the valid proxies received in advance of the meeting are displayed on the screen. The results of the voting for this resolution will be released to ASX after the conclusion of this meeting. I will now ask Mr. Hollis if any questions or comments have been submitted in relation to Item 5 to the management of the company.

There are no questions, John.