Announcement PDF 25 February 2025 The Manager Company Announcements Office ASX Limited Exchange Centre 20 Bridge Street Sydney NSW 2000 Dear Sir or Madam, Appendix 4E Preliminary Final Report – Listing Rule 4.3A The Appendix 4E Preliminary Final Report and the Annual Financial Report for the Year ended 31 December 2024 is attached. Yours faithfully Melanie Andrews Company Secretary Preliminary Final Report of Electro Optic Systems Holdings Limited for the Financial Year Ended 31 December 2024 ACN 092 708 364 This Preliminary Final Report is provided to the Australian Stock Exchange (ASX) under ASX Listing Rule 4.3A. Current Reporting Period: Financial Year ended 31 December 2024 Previous Corresponding Period: Financial Year ended 31 December 2023 1 ELECTRO OPTIC SYS TEMS HOLDINGS LIMITED Ap p e n d ix 4E 1. Details of the reporting period This preliminary financial report under ASX listing rule 4.3A covers Electro Optic Systems Holdings Limited and its controlled entities (“the Group”) and is based on the attached audited Financial Report for the year ended 31 December 2024. 2. Results for announcement to the market Percentage Change % Revenue from ordinary activities Amount ($’000s) Up 18.0% To 258,696 Attributable to Continuing Operations Up 9.0% To 176,565 Attributable to Discontinued Operations Up 43.5% To 82,131 Profit / (loss) from ordinary activities after tax attributable to members (18,731) Attributable to Continuing Operations (34,162) Attributable to Discontinued Operations 15,431 Net (loss) attributable to members (18,731) 3. Dividends per security Amount per security Franked amount per security Final dividend Nil Nil Interim dividend Nil Nil Record date for determining entitlements to the dividend: • final dividend • interim dividend N/A N/A No dividends have been declared or paid. 4. Net tangible assets per security Net tangible assets at 31 December 2024* $190,377,320 Number of ordinary shares outstanding at 31 December 2024 192,952,099 NTA per ordinary share at 31 December 2024 98.7 cents per share NTA per ordinary share at 31 December 2023 93.1 cents per share *including Right of use assets and lease liabilities recognised in accordance with AASB 16 Leases 2 ELECTRO OPTIC SYS TEMS HOLDINGS LIMITED Ap p e n d ix 4E 5. Further disclosures Refer to the table below for further disclosures required under ASX Listing Rule 4.3A: ASX 4E item: Requirement Cross reference 1 2 3 Details of the reporting period Results for announcement to the market Statement of financial performance and notes 4 Statement of financial position and notes 5 Statement of cash flows and notes 6 Statement of retained earnings 7 8 Dividends per security Dividend reinvestment plan 9 10 11 12 13 14 Net tangible assets per security Details of entities over which control was gained or lost during the year Details of associates and joint ventures Other significant information Foreign entities Commentary on results 15-17 Audit Refer to Section 1 above. Refer to Section 2 above. Refer to the Consolidated Statement of Profit or Loss and Other Comprehensive Income in the attached Financial Report. Refer to the Consolidated Balance Sheet in the attached Financial Report. Refer to the Consolidated Statement of Cash Flows in the attached Financial Report. Refer to the Consolidated Statement of Changes in Equity in the attached Financial Report. Refer to Section 3 above. There was no dividend reinvestment plan in operation during the financial year. Refer to Section 4 above. None - refer to Note 26 in the attached Financial Report. None. Refer Directors’ Report and Financial Report. Refer to Note 1 in the attached Financial Report. Refer to Review of Operations in the attached Directors’ Report. This report is based on the consolidated financial statements which have been audited by Ernst & Young with the Independent Auditor’s Report included in the attached Financial Report. 3 ELECTRO OPTIC SYSTEMS HOLDINGS LIMITED ACN 092 708 364 FINANCIAL REPORT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2024 1 ELECTRO OPTIC SYSTEMS HOLDINGS LIMITED ACN 092 708 364 CORPORATE DIRECTORY Directors Mr Garry Hounsell (Chairman) Dr Andreas Schwer (Managing Director and CEO) Air Marshal Geoffrey Brown AO The Hon Kate Lundy Mr David Black Mr Robert Nicholson Chief Executive Officer Dr Andreas Schwer Company Secretary Ms Melanie Andrews Registered Office and Principal Place of Business 18 Wormald Street Symonston ACT 2609 Australia Telephone: +61 2 6222 7900 Email: enquiry@eos‐aus.com Website: www.eos‐aus.com Share Registry MUFG Corporate Markets A division of MUFG Pension & Market Services Level 12, 680 George Street Sydney NSW 2000 Australia Locked Bag A14 Sydney South NSW 1235 Australia Telephone: +61 1300 554 474 Facsimile: +61 2 9287 0303 Website: www.au.investorcentre.mpms.mufg.com Auditors Ernst & Young 121 Marcus Clarke Street Canberra ACT 2600 Australia 2 REVIEW OF OPERATIONS 1. RESULTS FOR FULL YEAR ENDED 31 DECEMBER 2024 For Electro Optic Systems Holdings Limited and its subsidiaries (collectively, the “Group” or “EOS”), revenue from continuing operations activities was $176.6m, representing a $14.6m or 9% increase compared to the prior year (2023: $162.0m). The loss before tax from continuing operations was $38.5m, compared to a loss of $55.6m in the prior year. Underlying earnings before interest, taxes, depreciation, and amortisation (“EBITDA”)1 from continuing operations (prior to foreign exchange gains and other one‐off adjustments) for the year was a loss of $12.9m, representing a decrease of $0.1m compared to the prior year (2023: $13.0m loss). Further detail is disclosed on the following page. The Group reported an operating loss after tax from continuing operations of $35.1m for the year (2023: $44.3m loss). Continuing operations does not include the financial results of EM Solutions Pty Limited and its subsidiary (“EMS”) for either the current or the comparative period. On 21 November 2024, the Group announced the sale of a subsidiary, EMS. The activities of EMS are disclosed as a discontinued operation at 31 December 2024 and detailed in Note 5 to the financial statements. After the end of the year EOS announced the completion of a transaction to divest 100% of the equity in EMS as well as full repayment of the outstanding debt facilities owed to Washington H. Soul Pattinson (“WHSP”). Further details are set out in the sections below. The Group reported net cash outflows from operations (including EMS) for the year totalling $30.4m (2023: $113.1m net cash inflows). In addition, the Group reported $3.7m of net cash inflows from investing activities (2023: $34.7m of net cash outflows). The net cash inflows from financing activities for the year was $9.2m, due to equity capital fund raising of $35m during the year. The cash inflows from financing activities were reduced by the repayment of WHSP debt (2023: net cash outflows $29.1m). At 31 December 2024, the Group held cash totalling $52.3m consisting of $41.1m from continuing operations, and $11.2m from discontinued operations which is included in assets classified as held for sale (2023: $71.0m Group total consisting of $51.5m from continuing operations, and $19.5m from discontinued operations). In addition, the Group had $56.1m of restricted cash security deposits consisting of $49.5m from continuing operations, and $6.6m from discontinued operations (2023: $67.1m Group total, including $6.6m for discontinued operations). Key elements of financial performance are summarised below. 1 Underlying EBITDA represents earnings before finance costs, depreciation, amortisation and taxation expense, discontinued operations, and one‐off items. This is a non‐IFRS and unaudited measure which provides useful financial information. 3 REVIEW OF OPERATIONS (continued) Revenue For the year ended 31 December 2024, the Group recorded revenue from continuing operations of $176.6m (2023: $162.0m), representing an increase of $14.4m or 9%. The increase in revenue was driven partly by higher Defence Systems segment revenue, up from $155.4m in 2023 to $165.7m in 2024, an increase of $10.3m. More detailed information is provided in Section 4 below. Revenue in the Space Systems segment (excluding EMS) also increased on prior year to $10.8m (2023: $6.7m). More detailed information is provided in Section 4 below. The underlying cause of the 2024 revenue increase was higher activity levels, including on the delivery of a Defence Systems contract to a customer in the Middle East, the delivery of a contract to a Western European Government and the commencement of new space capability contracts with the Commonwealth of Australia. At 31 December 2024, the Group (excluding EMS) had an order book backlog of unconditional contracted future work of approximately $135.6m. This represents work under customer contracts, mainly in Defence Systems. The size of this order book at 31 December 2024 is smaller than expected because some opportunities that were targeted to be secured in 2024 are taking longer than expected to develop. The order book backlog is currently expected to be converted to revenue principally in 2025 and 2026. In addition to the unconditional contracted order book, EOS had conditional orders with Ukrainian customers to a total value of A$181.0m. More details are set out in section 4 below. We continue to work on various opportunities and aim to grow the order book during 2025. Expenses Expenses in continuing operations increased from $220.8m in the prior year to $228.6m in this year. This increase of $7.8m was partly driven by an increase in employee benefit costs of $8.4m resulting from higher activity. This is offset by reduced finance costs of $10.7m due to decrease in interest incurred following the repayments of debt facilities in September 2023 and April 2024. The increase of $2.9m in administration expenses in 2024 included the impact of work to develop market opportunities into orders, particularly increased marketing costs associated with new product launches and increased travel and management costs associated with growing international markets. Depreciation and amortisation charges increased by $3.1m from the prior year primarily due to higher amortisation of previous years’ transfer from property, plant and equipment and the commencement of amortisation on product development cost. The Group’s gross margin % from continuing operations was 48% in 2024 (2023: 45%). This increase was driven by higher margin sales being achieved in 2024 in the Defence Systems business. The Group’s gross margin includes Revenue from customers and Raw material and consumables used. Underlying EBITDA Underlying EBITDA for continuing operations (prior to foreign exchange gains and other one‐off adjustments) was a loss of $12.9m, compared to a loss of $13.0m in the prior year. 4 REVIEW OF OPERATIONS (continued) Continuing operations Year ended 31 December $m 2024 2023 (Loss) for the year (35.1) (44.4) Income tax (benefit) (3.3) (11.2) (Loss) before tax (38.4) (55.6) Finance costs 24.6 35.3 Foreign exchange (gain) (11.6) (0.9) Underlying EBIT (loss) (before impairment and foreign exchange gains) (25.4) (21.2) 12.5 9.4 - (1.2) (12.9) (13.0) Depreciation & amortisation Other one-off (gain) adjustment Underlying EBITDA (loss) (before impairment and foreign exchange gains) Impairment There were no impairments recognised in the year ended 31 December 2024 or 2023. Foreign Exchange The results from continuing operations included foreign exchange gains in the year of $11.6m (2023: gain of $0.9m), which predominantly arose on the translation of US Dollar assets into Australian Dollars. Contract Assets The Group recognises a contract asset, being revenue recognised on projects that has not yet been invoiced to customers. Revenue is recognised under Australian Accounting Standards. Amounts are invoiced to customers in accordance with legal arrangements specified in customer contracts. At 31 December 2024, the Group had contract assets totalling $57.4m (31 December 2023: $68.0m, including $5.8m from EMS), being revenue earned but not invoiced, primarily on a project with a significant overseas customer in the Middle East. The contract asset decreased by $10.6m during the year, due to invoices issued to customers during the year exceeding revenue recognised on customer contracts. Contract Liabilities The Group recognises contract liabilities for amounts that have been received from customers as advance payments on projects. During the year, the amount of contract liabilities increased from $20.6m at 31 December 2023 to $24.1m at 31 December 2024. Cash Balances The cash balance (including held for sale) decreased from $71.0m at 31 December 2023 to $52.3m at 31 December 2024. 5 REVIEW OF OPERATIONS (continued) The Group continues to closely monitor its cash flow outlook, to ensure that adequate funding is in place and, if necessary, seek to amend the Group capital structure. The Group continues to focus on maximising cash inflows, including seeking contract amendments on existing contracts where appropriate, and securing and delivering on new sales contracts that are cash positive. Cash Flows from Operating Activities During the year, the Group had a net cash outflow from operating activities of $30.4m. Net cash from operating activities was impacted by a decrease in Receipts from Customers from $325.5m in the prior year to $261.1m in 2024. The decrease in receipts follows a contract amendment that resulted in relatively high levels of cash collection during 2023. Payments to Suppliers and employees of $268.4 m, increased from $215.9m in the prior year, due to the increased supplier payments as the result of increased activity and investment in supply chain resilience (including long‐lead time items). Cashflows from other operating activities of $23.1m (outflow) was largely driven by interest paid during the year. Cash Flows from Investing Activities The Group had a net cash inflow of $3.7m from investing activities during the year. This included net cash inflows of $15.2m for security deposits for bonds released under contract with an Australian customer, and cash outflows of $11.5m from acquisitions of property, plant and equipment, and intangibles. Cash Flows from Financing Activities A net cash inflow of $9.2m from financial activities were achieved during the year, compared to a net outflow of $29.1m in the prior period. The 2024 inflow mainly arose from the impact of the equity raise, partially offset by debt repayments. During March and April 2024, the Group undertook an equity capital raising via a fully‐underwritten Placement and a Share Purchase Plan. The Group successfully raised $33.2m (net of fees) via a fully‐ underwritten placement of approximately $20.6m new fully paid ordinary shares on 25 March 2024. The Group also raised an additional $1.7m (net of fees) via a Share Purchase Plan on 22 April 2024. Proceeds from the equity raise have been, and will continue to be, applied to support future sales growth in key global markets, through investment in long lead time critical supplies, specifically Remote Weapon System (“RWS”) cannons, other long lead time equipment components and security deposits for bank guarantees. The Group repaid $20.5m to retire its second Working Capital Facility which matured on 11 April 2024. After the end of the year, the Group repaid remaining borrowings. More details are set out at sections 5 and 10 below. 2. CHANGES IN DIRECTORS AND MANAGEMENT During the year, there were no changes to Board membership. The following changes to the management team occurred:   Mr Christian Tobergte was appointed Executive Vice President of Defence Systems International in April 2024 to lead international growth in the Defence Systems business outside of Australia. This role will be based in Europe. Mr Clive Cuthell was appointed Chief Operating Officer in addition to his existing role as Chief Financial Officer, to focus on execution of key group initiatives to support growth. 6 REVIEW OF OPERATIONS (continued)  EOS brought its company secretary function fully in house during the year. Ms Leanne Ralph resigned as Joint Company Secretary on 31 May 2024, leaving EOS employee Ms Melanie Andrews, (appointed 26 March 2024) as the sole Company Secretary. 3. STRATEGIC UPDATE During 2022 EOS initiated a multi‐year turnaround program. 2024 represented the second full year of this turnaround program. During 2024 EOS reviewed how best to continue working to commercialise our longstanding intellectual property. Based on compelling market dynamics, EOS has determined to focus on the growth opportunities in the counter‐drone and space domains. As part of this strategic refocussing, it became apparent that EMS, EOS’ naval satellite communications business, had become non‐core to the growth strategy. As such, a process was initiated to divest this business which culminated in executing an agreement to sell the business to Cohort plc in November 2024. The divestment of EMS (which was completed on 31 January 2025) leaves EOS with a strengthened balance sheet. EOS intends that capital will be prudently deployed to support the growth opportunities identified in counter‐drone and space domains noted above. In line with the work to grow the core business, EOS restructured its core Defence Systems organisation in order to better focus on its strategic objectives to maximise international sales and optimise its operations. This saw the establishment of a new role of “EVP Defence Systems International” in April 2024 to drive international business growth. In addition, the role of “EVP Defence Systems Australia” is now focussed on Australian activity including all of the operational activities there. These roles are filled by highly experienced defence industry leaders, Christian Tobergte and Ian Cook, respectively. 4. DETAILED SEGMENT UPDATE a) EOS DEFENCE SYSTEMS Defence Systems had a positive year ended 31 December 2024, with revenue increasing from $155.4m in the prior year to $165.7m in 2024. This $10.3m increase was predominantly due to the impact of the continued focus on the contract for a large customer in the Middle East and a new contract with a Western European Government. The main activity during the year was the manufacture and delivery of RWS for several different customers. Market Overview and Sales Activity Throughout 2024, ongoing conflicts in Ukraine and the Middle East, as well as rising tensions and increased defence spending in other regions, supported customer demand and customer enquiry. EOS continues to pursue a number of material opportunities in different international markets, including Europe, the Middle East, North America and other international markets. Typically, EOS operates in an industry where it can take an extended period of time (including up to, and beyond, twelve months) for new market opportunities to be converted into signed sales contracts. 7 REVIEW OF OPERATIONS (continued) Work continued during the year on sales opportunities, including significant projects in Australia and internationally. During the year, negotiations continued in Australia to finalise a contract with Hanwha Defence Australia (HDA) for the provision of RWS in relation to the Australian Land 400 Phase 3 project opportunity. Under this project, HDA has been selected to deliver 129 infantry fighting vehicles to the Australian Defence Force (ADF) in 2027 and 2028. In the year to 31 December 2024, Defence Systems entered into contracts with customers for the following new business:      a contract to supply Slinger Counter‐Drone RWS to Diehl Defence in Germany valued at €9m (~$15m); orders from Thales worth $5.4m for the supply of 10 new and refurbishment/upgrade of 9 R400 RWS under its sustainment agreement with the customer; an order for Counter‐Drone Container Based Remote Weapon Systems (CBRWS) from a new Western European customer valued at €8m (~$13.6m); a contract to supply R600 RWS unit spares to a customer in Southeast Asia, valued at approximately $28m; and EOS Singapore received orders for remote weapon system spares worth SGD17m (~$20m). During the year, EOS continued to work with the Ukrainian end‐users and customers to allow committed orders to be placed under the conditional contracts that were announced in April 2023, (valued at approximately $181.0m). EOS has been advised that the Ukrainian Ministry of Defence (MOD) has now listed its R400 with M230LF on the official Armaments List. This listing is a key step toward allowing the MOD to use Ukrainian funds to purchase EOS systems. The situation in Ukraine remains fluid and is subject to changing battlefield priorities, budget constraints and evolving donor attitudes. As announced previously, there is no certainty or guarantee that committed orders will be received by EOS under these conditional contracts. Defence Systems continues to be in active discussions and contract negotiations for the provision of RWS and related components with other potential customers. In 2024 a number of demonstration units were provided to potential customers for evaluation purposes. Assuming the evaluation of these systems progresses positively, EOS would hope to move to sell larger, commercial quantities to these customers. There is no certainty that any particular outcome or transaction will result from these discussions and negotiations. Product Development Product development work continues on a range of opportunities. Where development costs are significant, the Group is focused on obtaining third party funding, to speed delivery to the market and manage costs and returns on capital. Defence Systems continued to develop its intellectual property and commercialise its product range during the year:   EOS continued discussions with potential customers for the R150 RWS (launched during 2023) and the R800 RWS (launched during 2023). In addition, EOS was in discussions with customers about the development and supply of RWS for the marine market (i.e. naval applications). Following the 2023 launch of the flagship Slinger counter‐drone system, work continued to meet strong demand for counter‐drone solutions. In addition to ongoing demonstrations of 8 REVIEW OF OPERATIONS (continued)    the Slinger counter‐drone system capabilities to customers, in July 2024, the Group also successfully demonstrated its Laser Dazzler at the CUAS Sandbox event in Canada. The Laser Dazzler can be integrated into EOS’ existing RWS, giving operators the flexibility to use either kinetic or non‐kinetic electronic warfare measures against aerial threats. EOS and the Australian Defence Force (ADF) Robotic and Autonomous Systems Implementation & Coordination Office (RICO) demonstrated the advanced long‐range firing capabilities and precision of EOS' R400 RWS, remotely controlling an RWS from over 500km away to destroy ground targets. Capabilities of an R600 RWS were demonstrated on a US Army Small Multipurpose Equipment Transport (S‐MET) robotic infantry support vehicle. Using this platform, EOS successfully shot down pairs of Class 1 drones at ranges of more than 300m and engaged multiple ground targets with 30mm cannon from this robotic platform. EOS received a request from a large potential customer in the United States to develop an autonomous capability for the Slinger counter‐drone system. Typically, new product launches in the defence industry can take one to three years to achieve significant sales and develop commercial maturity. High Energy Laser Weapon EOS believes that High Energy Laser Weapons represent a significant strategic growth opportunity. During the year, the Group continued discussions with international customers for the potential sale of its new 50kW and/or 100kW High Energy Laser Weapon (HELW). EOS views that the signing of one or more of these commercial agreements would mark an important milestone as it works towards commercialisation of this product line. It is expected to take some time for HELW products to achieve significant commercial scale. There is no certainty that any commercial agreements will occur or that HELW products will achieve commercial scale. In 2024 EOS established a Laser Innovation Centre in Singapore to carry out new product development work on High Energy Laser Weapon systems. In order to facilitate this, the Group established a new 100% owned company, ‘EOS Innovation Singapore Pte Ltd’. Supply Chain, Operations and Facilities In 2024 EOS reinvigorated its supply chain team and during the course of the year we have focussed on a number of critical initiatives including:  Material Requirements Planning (MRP): Upgraded the MRP systems to improve demand forecasting accuracy, align production with lead times, and optimise planning and delivery.  Supply Chain Efficiency: Enhanced on‐time delivery performance, streamlined component sourcing, and refined production timelines for greater efficiency and reliability. Further, in order to improve overall supply chain resilience, safety stock levels for some critical components have been reviewed and, in some areas, increased. b) EOS SPACE SYSTEMS For the year to 31 December 2024, continuing operations revenue in the EOS Space Systems segment (excluding EMS) increased to $10.8m from the prior year (2023: $6.7m). The Space Systems business delivers space domain services as well as designs, manufactures and deploys telescope and observatory equipment. 9 REVIEW OF OPERATIONS (continued) During 2024, Space Systems continued to grow and commercialise its technology. Space Systems announced in April and July respectively that it had secured a $5m and a subsequent $9m contract with the ADF Joint Capabilities Division in Australia to further develop space capabilities. These projects represent a significant strategic opportunity for EOS and this work was developed consistent with EOS stated strategy of securing third party funding for new capability development work. During the year, Space Systems continued to develop the market for space control solutions. EOS believes that the future market for space control solutions is potentially very large. During the year, EOS identified several emerging space control opportunities in overseas markets and discussions were held with various potential partners to start to develop these opportunities. Discussions to date have focussed on the Group’s unique capabilities and potential opportunities for the Group to secure product development funding. These discussions are expected to continue in 2025 and will be supported by demonstrations where appropriate. This market development work is being conducted to support significant long term strategic growth. Typically, in this area it can take several years for opportunities to be developed and converted to signed sales agreements and there is no guarantee that this will be successful. KiwiStar Optics continues to work on programs for a range of international customers and to seek further opportunities in international markets. 5. DISCONTINUED OPERATONS AND REPAYMENT OF DEBT In November 2024, the Group announced its intention to divest 100% of EMS to Cohort plc for an enterprise value of $144.0m. EMS designs, builds, deploys and maintains on‐the‐move satellite communication equipment systems for defence forces. EMSs’ main products include satellite communication terminals and antennae for naval vessels and other applications. During 2024, EMS continued to focus on building its order book and delivering its satellite communication systems to customers in Australia and other regions. In 2024, EMS worked on the deliverables required under the SEA 1442 Phase 5 contract for the Royal Australian Navy. Subsequent to year end:  On 31 January 2025, the transaction to sell 100% of the equity in EMS completed. Accounting for customary adjustments for working capital and net debt, a consideration of $158.6m was received.  On 31 January 2025, EOS repaid all remaining debt owing to WHSP. This amounted to $61.1m which included a “make whole” as required under the facility agreement. Following this repayment, EOS no longer has any outstanding borrowings. 6. SUBSEQUENT EVENTS Apart from items outlined above in this Review of Operations, there have been no transactions or events of a material and unusual nature between the end of the reporting period and the date of the report likely, in the opinion of the Directors of the Company, to significantly affect the operations of the Group, the results of those operations, or state of affairs of the Group in future years. 10 REVIEW OF OPERATIONS (continued) 7. MATERIAL BUSINESS RISKS The following is a summary of the material business risks of the Group. These are not listed in any order of importance and do not constitute an exhaustive list. Any of these risks may adversely impact on the financial and operating performance and prospects of the Group and on the ability of the Group to continue operating as a going concern. (i) Customer Concentration & Future Sales Revenue risks Currently, the Group’s activities are concentrated with a relatively small number of customers and the Group has a secured contract backlog of approximately $135.6m (excluding EM Solutions and excluding conditional contracts). The Group’s ability to continue operating depends on its ability to secure profitable future sales contracts from existing and new customers. The Group is working to mitigate risk to the best of its ability by implementing plans to diversify the business with a wide range of new customers in different markets. The Group has a detailed pipeline of potential future opportunities which are being developed. There is a risk that opportunities are cancelled, delayed or take longer than expected to be secured