That is good work - one thing I liked about the way the AGM was run, is that they defined several things:
- Profit target ranges - Currently holding at 250M revenue, and in an observation and planning stage with growth levels expected to slow during this planning level - the next "planning level" standing at $1,000,000,000 revenue (1 billion, so you don’t have to put your glasses on) – 1:02:00 in the presentation.
- There is an importance to keep growth below 70% through 2023, at which point investment capital will be required (59:47 in the presentation). I assume this would be to find the required production and logistics infrastructure).
- The fact that they were at the point in the business where there would be no capital raising (22:45 in the AGM feed).
- There are $1,000,000,000 contracts incoming to the business at advanced stages of negotiation/finalisation (1:04:47 in the presentation). These contracts will be finalised by the end of the 4th quarter – you can expect positive announcements.
The timeline on these contracts were not defined, however it makes very clear that the jump from 250m to 1bln, once the planning stages are complete, may be rapid.
- Demand is exceeding the business’ ability to supply with current setup.
- No dividend intends to be paid at current growth model - do not invest with EOS if you want dividends (59:56 in the presentation).
Effective profitability:
- The company, minus foreign exchange losses and research advancement costs, is already profitable (20:30 on the AGM feed).
It would be possible TODAY, to aim to stabilise the business at a 2-300M business, and pay a 40-50m dividend each year if the goal was to pay a dividend (1:02:35 in the AGM presentation). This implies that real profit margins stand at 16.67-20%. These are my own calculations and I may have well under, or over estimated.
Business shareholder goal:
The business intends to grow at a massive rate, using profits deliver a massive capital gain to shareholders over time. The goal is not to pay dividends, which IMO is the correct goal for a developing technology company. (21:13-22:14 in the AGM presentation)
SpaceLink (50:00 onwards on the AGM presentation):
- That one of their most advanced forms of technology (being their earth to satellite up-link and down-link technology, otherwise known as SpaceLink) was being run at a break even rate, to maximise advanced development, and that when it was completed in 4-5 years it would be capable of speeds 100x faster than any current technology - and secure. - 5 clients currently use SpaceLink (one of which is the Australian Navy, 49:10 in the AGM presentation). What I took from the presentation personally, was that these customers are effectively funding the advanced research. It was discussed earlier that the technologies EOS supply can be "dumbed down" or dialed up, depending on the client, to prevent the “handing over" of proprietary IP to a customer (40:00 in the presentation).
There is a hint that SpaceLink may be spun off as a separate entity (1:04:15 in the presentation) with EOS shareholders either receiving shares in, or being able to buy shares at a discounted rate within SpaceLink. I may be totally wrong on this, however suspect that is the intent after the initial declaration that there is no further requirement for capital raising.
It is clear that this is a “realisation of value for shareholders” event and will be positive – if this plays out, the hardest decision may be which entity you fund after the split.
Counter-drone/UAV technology (34:17 in the AGM presentation):
I believe, the initial discussion about 100 armoured vehicles being hit by drones was an attack against Saudi assets by Houthi forces with Iranian backing. Later in the presentation, it talks about the result of this attack meant that the force which had their vehicles destroyed lost the war (59:17), and has invested significantly in EOS counter-drone solutions as a result.
There are 8 aspects to counter drone capability, EOS built 6 and outsource 2 - the next closest builds 2, and outsources 6. I am unsure who this company is but suspect they would be Israeli. There is discussion that there are only two counter-drone companies operating in Australia, with that second company still under development.
That second Australian company is DroneShield (DRO), which is orientating itself more towards airport/airfield protection rather than "on the go field of battle" type set up. They are doing business in the Middle East as well as other locations; however cash flow is an issue.
Discussion about NATO counter drone - I took this as NATO looking to increase defensive capabilities against Russia in the areas of Ukraine, Poland, Georgia and other former Soviet Bloc countries. Russia has significant "drone swarm" technologies being developed which need serious counter-measures developed quickly and to be able to be deployed at short notice (in the AGM, we hear also about these counter-drone technologies being able to be launched from tanks, one would also assume APC's and the like).
Space systems:
- Technology is now developed to "kill" drones at a range of 5KM (38:08 in the AGM presentation) - this technology is now part of the defence umbrella of EOS.
- A laser which operates on a different frequency allows for the correction of effects of atmospheric interference, resulting in an increased rate of transmission. This once fully developed will create an outcome of an increased efficiency from the current standard offering globally of 1 gigahertz to 1 terahertz within 6-8 years (40:00-40:27 in the AGM presentation) - a 1000% increase in transfer technology.
- EOS has more RF spectrum (exclusively) which is larger than all US companies collectively. The use of this spectrum will be for space to earth communications - the company has no current interest in geo-communication or low-earth orbit communication technologies.
- The allocated RF spectrum is 1% of what is required (by EOS?) 10 years from now - which I took to mean, that EOS is looking to grow activity on spectrum by 100x in 10 years (45:37 in the AGM presentation) if the assumption is that the 1% needed is for EOS only.
EM Solutions - the bridge:
EM Solutions technology will form the bridge to SpaceLink via SatCom terminal, and ground based counter drone and other defence platforms as demonstrated in the presentation. Their EBIT has increased by 50% in the past 6 months, with order backlogs increasing (48:04 in the AGM presentation).
Not only does each business provide organic customer bases between ground and the need for orbital gained or transmitted data, but the ability for the EM solutions platform to be accessed by EOS means that they will be able to prepare technology for those SatCom terminals to accept the same amount of data down, as is being transmitted up. This means that there will be no bottlenecks in data transmission (49:20 in the AGM presentation) with 0.3/sec delay vs up to 8, but typically 2 hours using current standard satellite technologies (50:00 in the AGM presentation). That is a massive, massive reduction in transmission delay (24,000% on the 2hr vs 0.03s model, more on an 8hr model).
EOS Price at posting:
$4.16 Sentiment: Buy Disclosure: Held
(20min delay)