Electro Optic Systems Holdings Limited · ASX:EOS
Electro Optic Systems — FY2021 Earnings Presentation
34 slides from Electro Optic Systems's earnings presentation, Feb 28, 2022
Slide 1: 2021 Full Year Results
2021 Full Year Results Investor Presentation 28 February 2022 1
Slide 2: Important Notice and Disclaimer
Important Notice and Disclaimer CONTENT OF PRESENTATION FOR INFORMATION PURPOSES ONLY Forward-looking Statements This presentation may contain statements that are, or may be deemed to be, forward-looking statements. Such statements can generally be identified by the use of words such as ‘may’, ‘will
Slide 3: Important Notice and Disclaimer
Important Notice and Disclaimer Preparation of Information All financial information has been prepared in accordance with Australian Accounting Standards. Certain financial data included in this presentation is ‘non IFRS financial information’ noting that the financial information relating to FY2021
Slide 4: FY21 Results Highlights
FY21 Results Highlights DR BEN GREENE, CEO 4
Slide 5: Overview
Overview EOS is making the future happen today $211.8m $(7.5)m $(16.8)m $342m $2.6bn 5
Slide 6: FY21 Key Operational Highlights
FY21 Key Operational Highlights COVID-19 still impacting business • Marketing and product demonstrations limited, and contract award decision-making slowed • Most contract awards expected in 2021 were deferred to 2022 • Internal safety procedures proving relatively effective with low staff infection
Slide 7: SpaceLink Accelerates Constellation Rollout
SpaceLink Accelerates Constellation Rollout Advanced discussions for interim smaller satellite constellation • Recent technical advancements enables alternate solution • Two vendors shortlisted • Contract award scheduled for April 2022 Initial project costs reduced to US$240m (previously >US$700m) •
Slide 8: SpaceLink Spectrum Value Capture
SpaceLink Spectrum Value Capture SpaceLink has unrivalled spectrum allocation • Largest allocation of RF spectrum licensed to any commercial satellite network (21 GHz) • Significant spectrum allocation in highly desirable K, Ka, and Q/V bands Spectrum allocation1 secured by meeting regulatory milest
Slide 9: Overseas Contract Returning to Normal
Overseas Contract Returning to Normal COVID-19 disruptions continued albeit at a lower level • Deferred deliveries cascaded from 2020 into 2021 and $16m of deliveries were deferred from 2021 to 2022 • Delays in the delivery of customer-furnished equipment impacted physical integration activities and
Slide 10: FY21 Financial Highlights
FY21 Financial Highlights MICHAEL LOCK, CFO 10
Slide 11: FY21 Financial Headlines
FY21 Financial Headlines Record revenue • EOS delivered a record level of revenue from ordinary activities in 2021 • ~$20m of revenue (and associated direct costs) deferred into 2022 Strong growth in gross margin • Gross margin of all major segments at or above pcp, with strong growth in Group opera
Slide 12: FY21 Segment Performance
FY21 Segment Performance Defence Systems • Revenue including other income rose 17.6% • Underlying EBIT delivered a strong rebound as profit, which was deferred in 2020 due to COVID-19, was recognised in 2021 Communications • EM Solutions delivered 20.4% revenue growth and a solid profit contribution
Slide 13: FY21 Net Cash Flow Movements
FY21 Net Cash Flow Movements Net cash flow • Adversely impacted by deferred delivery of ~$20m RWS to key customers Payments to suppliers • $224.9m includes $48m expensed on SpaceLink, R&D and facilities Net Borrowings • EOS drew down on a $35m working capital facility arranged in 2021 13
Slide 14: Investment in Growth
Investment in Growth Near-term opportunities driving investment $125m cash invested $m • Over the past two years significant near-term opportunities have required a large investment 2021 2020 Research & Development R&D 27 20 • Over 50% of all R&D expensed SpaceLink 37 12 Investment in emerging techn
Slide 15: Contract Assets
Contract Assets Accounting standard drive balances Contract Asset: The timing difference between the amount Amalgam of two contracts and several businesses of revenue recognised per accounting standards and the Deferral request added to year end balance value of invoices EOS is eligible to submit pe
Slide 16: FY21 Operational Highlights
FY21 Operational Highlights GLEN TINDALL, CEO SPACE SYSTEMS 16
Slide 17: Space Systems
Space Systems SpaceLink pipeline growing and firming Potential near-term opportunities • Government Space Agency: US$40m over 5 years • Space platform: US$100m over 5 years • Earth observation data: US$100m over 5 years Strong pipeline • Highest 25% of opportunities ~US$200m pa revenue risk-weighted
Slide 18: Space Systems
Space Systems EM Solutions record delivery, strong pipeline World-leading technology • Deployed across 6 navies spanning the globe • Closed-loop monopulse tracking gives higher speeds and greater uptime • Terminal covers multiple frequency bands at once providing link redundancy • Agile collaborativ
Slide 19: Space Systems
Space Systems Urgency to secure space Space Domain Awareness (SDA) • SDA service adoption accelerating due to geopolitical tensions • EOS’ satellite laser ranging (SLR) provides highest accuracy data, unmatched by other ground-based sensor technologies, such as RADAR • EOS combines SLR data to accur
Slide 20: FY21 Operational Highlights
FY21 Operational Highlights GRANT SANDERSON, CEO DEFENCE SYSTEMS 20
Slide 21: Defence Systems
Defence Systems 2021 continued growth Improved revenue, cash and profitability • Strong outcome given COVID-19 and supply chain challenges • Increased profitability and two new customers added to the EOS RWS user community • High level of R&D investment while increasing profitability Production leve
Slide 22: Defence Systems
Defence Systems RWS product range Superior performance underpins product offering • R400 with 30x113mm cannon continues to demonstrate accurate lethality out to 2.2 kilometres on the move • Substantial range advantage (40%+) over all other competitors • Marine variant achieving results beyond expect
Slide 23: Defence Systems
Defence Systems Unmanned Ground Vehicles Major growth segment • Multiple advances in technology have made remotely operated vehicles with a range of lethality capabilities very attractive to allied forces • EOS technology lead in accuracy and reliability are major advantages in this domain • EOS sup
Slide 24: Defence Systems
Defence Systems Directed energy market and products evolve GS to review Product • 35 kW directed energy hard kill system for drones and missiles • Deployed for demonstration and for customer-funded development • More powerful 50 kW system ready for testing in Q3 2022 • Large proven laser power modul
Slide 25: Defence Systems
Defence Systems Effective CUAS developed Offensive drones continue to increase in frequency and lethality • New weaponised drones and loitering munition technologies are entering the market at a rapid pace • Cost of drones continue to fall while defensive costs continue to rise • Customer awareness
Slide 26: Defence Systems
Defence Systems C4 EDGE ingenuity delivered C4 Evolutionary Digital Ground Environment Communications • $34.4m project successfully delivered by EOS as Prime Contractor • All-Australian industry consortium demonstrated a Battlegroup and Below Battlefield Command System (battle management systems, ra
Slide 27: Strategic Outlook
Strategic Outlook DR BEN GREENE, CEO 27
Slide 28: Momentum: Eight Key Factors
Momentum: Eight Key Factors TAILWINDS HEADWINDS Geopolitics driving demand Human resources limits Productivity, output, profitability growing Cost of capital SpaceLink: business model profitability SpaceLink: capital requirements COVID-19 management and supply chain COVID-19 delays to contract award
Slide 29: Growth Options Across Portfolio
Growth Options Across Portfolio PRODUCT COMMENTS TAM / REV OPPORTUNITY RWS Strong market position and pipeline of potential awards in 2022/23. Focus on market-leading US$8bn / 10 years accuracy, weight and lethality to accentuate technology lead CUAS Achieved first funded contracts in 2021. New cont
Slide 30: Update on Pipeline and Backlog
Update on Pipeline1 and Backlog Backlog is committed contracts not yet fulfilled • Backlog is $342m comprising Defence ($295m) and Space ($47m) Defence Backlog $342m Space • Backlog 1.5 times FY21 revenue, within industry norms • Preferred backlog level is 2.0 times revenue of prior FY • Resumption
Slide 31: Summary
Summary • Core businesses are collectively moving forward and new production and margin levels were set in FY21 • FY21 loss due to deferral of Revenue and EBIT into 2022 • Cash conversion improved in 2021 • Lower backlog from delayed contract awards expected to recover through 2022 • SpaceLink • Rev
Slide 32: Glossary
Glossary • 2021 Full Year Results – preliminary unaudited results for 12 months ended 31 December 2021 • ADF – Australian Defence Force • CRAM – Counter rocket, artillery and mortar • CUAS – Counter unmanned aerial systems • EBITDA – Earnings before Interest Tax Depreciation and Amortisation • GBAD
Slide 33: Appendix Reconciliation of Statutory Profit and Non-GAAP measures
Appendix Reconciliation of Statutory Profit and Non-GAAP measures 33
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Electro Optic Systems Holdings — FY2021 Earnings Presentation on 6ix