I think that's probably 10 seconds. Good morning, ladies and gentlemen. My name is Peter James. I am the independent non-executive Chair of DroneShield Limited. On behalf of the board and my other colleagues, it is my pleasure to welcome you to the 2025 annual general meeting. I think looking at this room today, it's a sign of us growing up. We're used to sitting around, almost having a fireside chat. Today, courtesy of our colleagues at DLA Piper, we're in this much more impressive and perhaps more appropriate boardroom facility. It is now 10:00 A.M., and with the quorum present, I declare the meeting open for business. I confirm that the meeting has been properly constituted. The AGM, as I said, is being held as a hybrid, in-person and virtual meeting so that we can maximize the opportunity for our many shareholders.
I might say, I think there's today about 30,000 shareholders, and we welcome the attendance of you all, whether it's here in person or online. I'd like to introduce you to Oleg Vornik, and I must say, Oleg has turned up in full livery this morning. I felt as if I should have some company colors on, but I might say as Chair, I'm the last person to get any swag that is handed out. Oleg has been leading DroneShield for over nine years, and I think is known to many of you. He has prior experience in senior commercial and financial roles. Other independent, not executive, directors who constitute the remainder of the board are with me today. Simone Haslinger brings investment banking experience, providing strategic and capital advice to a diverse range of companies. Simone has joined us in October last year.
Simone will say a few words about herself on her behalf and also the company. Next to Simone, Richard Joffe, bringing Richard is a very successful global tech entrepreneur, and his specific skills are in scaling tech businesses. Both Simone and Richard have already delivered significant insights in the short amount of time they've been with us. My colleague, Jethro Marks, on the end there, has extensive commercial experience and again, in scaling businesses. Jethro likewise has been with the company for many years. Also present, the company's auditors, HLB Mann Judd, and Nick Guest, also with Nick, Katie, and Simon from HLB, and our joint CFO and joint company secretary, Carla, sitting quietly in the corner. Carla's been with us for many years. General Counsel and joint company secretary, Paul, is sitting, the very hirsute gentleman sitting over in the back there.
Paul's wearing a tie today. I think everyone's got propped up. David Bryan is here with Julia, Julia Caccavo from DLA. Once again, thank you for your insights, David and Julia, over the years. Also, as I said, for the use of this facility. Mary Curran from the Australian Shareholders Association has been monitoring and has been a shareholder for many years. Mary, we value your insights and your questions. I know I'm going to get a few today. Comes with the territory. I might also give a call out to Marcia sitting, Marcia Moseley sitting next to Mary. Marcia, also active in the Shareholders Association, has joined us today from the Central Coast and has already been in active dialogue with some good insights with the company over the past several weeks.
In terms of today's agenda, I'll provide the Chairman's address, following which we'll proceed to the more formal matters set out in the notice of the meeting that was dispatched to all shareholders in April of this year. Oleg will then provide an update on the business and all the great things that are happening and an outlook for the remainder of 2025. There will be an opportunity for questions of a general nature. If we can begin, I'm pleased to present to you today my review of 2024 and 2025 year to date. 2024 was the ninth year both for me as Chairman. I've been here since pre-IPO, the early days, and for DroneShield as a publicly listed company. I'll also give you an overview of our prospects going forward.
2024 has seen us, the company, produce another year of record revenues and substantial scale-up in the technological capabilities of the company. 2025 is already shaping to be a strong year. Now, when I went through my address again last night, I thought, "Gee, it's long," but then I reflected, "So much has happened in the last 12 months, and so much is happening and is about to happen in this company that if you can bear with me, I'll just go through it." Oleg will also as well. Highlights for 2024 and 2025 to date include our revenue last year of AUD 57.5 million, continuing our trend of achieving record revenues each year of our existence. Importantly, year to date, AUD 95.8 million revenue, either received or under committed purchase orders.
You can see the step up already this year, including the AUD 32 million order received last month. The other thing that's happening is each order is getting bigger. What typically happens is that the purchaser, usually a military or defense, buys a small amount to test it, then a bigger amount, and then a larger amount. That's a great trend. Our first quarter 2025 revenue of AUD 33.5 million, again, our highest quarter to date. We have become firmly established as a global operator. Importantly, today, over 90% of our revenues come offshore. There was a time as recently, say, as 12 months ago, where I would have said that most of those offshore revenues came from the U.S. Today, that is not the case. The U.S. is probably 25% of our revenues, and the rest are spread globally across Asia, South America, and also Europe.
We had strong sales cash receipts of AUD 56.9 million in 2024, and we raised a transformational AUD 235 million in new capital, positioning us for ongoing growth, importantly for R&D investment, and to also build up our inventory, as Oleg will explain, often given its military application, our customers want just-in-time delivery. We have strong cash and term deposit balance of AUD 197 million as of last month, a strong sales pipeline of AUD 2.3 million in active project discussions, and substantial tailwinds for the defense industry, with governments continuing to scale up their requirements. As you know, we were included in the ASX 300 index in September 2024. The Ukrainian war, where we have been deployed since the start of the war in February 2022, obviously on the Ukrainian side, continues to demonstrate the potential of drones and counter-drone systems on the battlefield.
This, combined with significant non-military applications and use cases, and the so widespread intelligence community, airports, prisons, border security, stadiums, and other facilities. With the new U.S. administration spearing Europe to reboot its defense procurement, Europe again represents the largest demand driver at present. As I said, we've just seen areas, geographies other than the U.S., really starting to ramp up. Following the recently announced EUR 800 billion rearm Europe plan, DroneShield already has on-the-ground salespeople in Europe, specifically in Denmark, supported by a network of distributors throughout Europe. We have already made existing material sales, and we are confident that we will continue to build on those sales. We are in the process of setting up a manufacturing facility. It's our first one outside of Australia.
We have a large manufacturing facility here in Sydney, but we're now in the process of setting up a manufacturing facility in Europe to support that demand. Asia is also showing to be a significant opportunity, especially for those countries that are bordering neighboring China, as multiple governments are commencing counter-drone programs against the threat of small Chinese drones conducting surveillance of sensitive areas. Excuse me. DroneShield has received, as we've announced, an AUD 32 million contract on the 14th of April 2025 from an Asian, and we just can't name the military. That builds upon a previous AUD 11.8 million contract from the same customer in January 2025. You can see January 2025, AUD 11.8 million, followed on pretty quickly, 14th of April, AUD 32 million.
The Middle East also is a significant opportunity for us, and we have a dedicated senior sales executive based in Abu Dhabi, again with a strong track record of tech sales in the region. In the U.S., the Trump administration recently announced a $1 trillion record defense budget with drones and counter-drones as a priority area. Tariffs on shipments from Australia, where drones are manufactured to the U.S., are anticipated to be substantially passed through. That is, we think we will not incur the impost of those tariffs, reflecting the highly differentiated nature of our solutions. Historically, the largest market, as I've said, the U.S., it is now a significant market, but it's not necessarily the biggest market. The U.S. business is led by a seasoned ex-military veterinary team. So, veterinary. Shall we say veteran, experienced in scaling U.S. government sales and the associated steps towards larger purchase.
So again, in each of our areas, we have experienced people, typically with military or security backgrounds. Once again, U.K. is another growth area. We have won several key contracts with the MOD to date, and we operate via an exclusive partnership with British Telecom, which we announced some years ago and which is starting to build nicely. The U.K. government, again, is in the process of lifting its defense spending. What's happening with the announcements coming out of the U.S., the rest of the world is starting to realize that perhaps they need to stand on their own two feet. We're seeing demand coming from other areas. Latin and South America are expected to be an increasing revenue segment with $9.7 million contract announced in January 2025. Again, we've now got our own salesperson, an experienced salesperson based in Mexico.
What you're seeing is a global company, global opportunities, global personnel, manufacturing in Australia, but now starting to look at manufacturing in Europe. Back home in Australia, Land 156, and we've talked about this, a major program to protect military bases around Australia is underway, and we are tendering across multiple packages. As I was saying to some of you before, we have an advisory board of ex-generals, ex-air commodores, etc., who are part of our team helping us tender for those. Also, other programs from the Department of Defence. We've had the Minister for Defense Industry, Pat Conroy, open our office in Sydney recently. It's a beautiful big new facility that we have. We've also had Richard Miles, the Deputy Prime Minister and Defense Minister, through, as we have had ambassadors from many different countries and consuls from many different countries coming through to have a look.
Outside of the military, airports are starting to display substantial interest in counter-drone. We have hired a seasoned ex-Smiths Detection sales exec based in Sydney to look at a global airport strategy. It is not just military. As again, I was saying to a few of you, we are starting to see areas like airports as a vertical emerge. Drone as a first responder is a new initiative globally where police or firefighting departments use drones to respond to an emergency, deploying a drone to the scene of the call. These rely on an ecosystem of drone makers, counter-drone companies such as DroneShield to track drones, and specialist software overlay software opportunities. Again, another opportunity for us. Procurement times to award are longer than larger projects due to additional probity requirements associated with larger deals.
We have a large number, 17 separate sales opportunities, each in excess of AUD 30 million in the pipeline. Now, that's not saying they're going to happen, but these large opportunities are out there. One of the things that I've observed, the board's aware of, these sales are lumpy. They're hard to predict exactly when they're going to drop because they're military, they're government, and they depend on a whole lot of complex factors. On the technology front, the company continues to significantly invest into the next generation of its offerings. Here we have a cat-and-mouse game. Again, I've said to many of you, when we come up with a defeat, say, against a Chinese drone or a Russian Iranian drone, the other side, the bad actors, will then look at what can they do to come up against our software.
Our engineers are constantly reviewing software, sometimes downloaded from the battlefield in real time, and just looking at what new initiatives have been put in place by bad actors, and then we have to adapt to that. Where the customer has detector drones, no matter what they could be requirements and a significant budget, we act as an integrator. That is, we take a number of components, not just our capabilities, and we deliver that as an integrated solution. Over time, we may add some of these alternative detect and defeat technologies into our own portfolio. We have a number of next-generation products due for release in 2026, utilizing our knowledge over the last decade as a pioneer. We have been a pioneer, as Oleg and I were reflecting back in 2015, 2016, going to Canberra, demonstrating to the military officials what was very nascent.
They said to us then, "Look, it's interesting. Come back when there's a crisis." Of course, today, we're back, and there is a crisis. Around the world, militaries are quickly responding. To de-risk new technology rollouts and continue engagement with existing leading-edge customers, the new product releases are staggered. During the first quarter of 2025, two minor hardware releases came out in response to market demand, and they're variants of the DroneGun Mk4 and RfPatrol Mk II. We continue to ramp up our mass production capabilities to the current AUD 500 million annual capacity across supply chain, inventory, and deployment aspects with a goal of immediate or short-term fulfillment. As I said, when a company or a customer wants our product, they want it fairly quickly.
Rapid order fulfillments not only enables a company to recognize revenues and receive cash receipts faster, but also increase the likelihood of follow-on orders. We're progressing through 2025 with a confident outlook. We've got tailwinds. We've put a lot of hard work in over the years, and we believe we're well positioned for the future. I'd like to thank, firstly, Oleg and his team. He lives out of a suitcase, and I do call him seven times, seven days a week, more than 7x . He is absolutely committed to this company. Oleg and his executive team, also the board of directors, we appreciate the invaluable contribution of the staff. Look, they are passionate. They're Aussies, by and large. They're doing good things around the world. They're working on leading-edge technology, and we are employing Australians as an Australian company.
Also, to my fellow shareholders, to those of you here today, either in presence, in person, or online, a global network of distributors, and of course, to the tremendous support of our customers. Thank you for listening to that, but hopefully you'll get a sense that a lot has been achieved in the last 12 months, 2024, and that 2025 has already started to be a very exciting time. We now move to the formal business as set out in the notice of the meeting. Notice of the annual general meeting was mailed to all registered members on the 28th of April 2025 and is to be taken as read. Voting on all resolutions will be conducted by poll.
For the purposes of the poll, we appoint representatives of Automic who are with us, the company's share registry who have examined and prepared summaries of the proxy forms received, directors returning offices, and to conduct the poll. Shareholders attending virtually and wishing to vote on the resolutions being put to the meeting can do so through Automic's investor portal. If you are not already logged into the investor portal, instructions on how to do so can be found in the notice of meeting and a summary you will see on the screen. If you already lodged a proxy vote, please note that you do not need to vote again through the online voting portal. Your votes will be already counted in the poll. You do not need to lodge another vote unless you wish to change your vote.
If you have any problems registering your shareholder holding with Automic, please call the support number shown on the screen. To allow shareholders time to log in, I now declare the poll open. Online voting is now open and will remain open until I declare it closed. Your votes must be submitted prior to the portal being closed for them to count. Those shareholders in attendance that are entitled to vote on the poll are all shareholders, representatives or attorneys, and proxy holders who hold yellow voting cards. If you're attending in more than one of these capacities, you will have been issued with as many voting cards as you have separate capacities. If anyone believes they're entitled to vote on this poll in any capacity and you do not have a yellow voting card, please raise your hand now, and a member of Automic share registry will assist you.
At the appropriate time, I'll ask you to mark your vote for the resolution on the yellow voting card. If you are a shareholder and wish to cast all of your votes for a resolution, please place a mark in either of the for, against, or abstain boxes. If you proxy, a summary of the votes which you're entitled to has been attached to the voting card. If the summary of votes includes discretionary votes, these are yours to cast at your discretion. If you wish to cast the discretionary vote, please place a mark in the corresponding for, against, or abstain boxes. If your summary of votes does not have any discretionary votes, you do not need to mark your voting card. You'll simply need to hand it to the returning officer at the end of the resolution.
After all resolutions have been read and voted upon, please place it in one of the ballot boxes, which will be circulating around the room. Are there any questions in relation to the voting process? All good? Okay. Proxies have been inspected, and all of those validly lodged have been accepted. They have been received representing 301 million odd shares or 34.5% of the issued capital of the company. All undirected proxies or open votes that have nominated the chair of the meeting as a proxy will be cast in favor of the resolutions set out in the notice of annual general meeting. We will now proceed to the resolutions set out in the notice of the annual general meeting. The first item of business is to receive the company's annual financial report for the year ended 31 December 2024.
The financial report and the reports of the directors and the auditors are now laid before the meeting. There will be no vote on this item, and it's for discussion only. The company's auditors, as I've said, are here with us today, and they are willing to take questions relevant to the conduct of the audit and the preparation and content of the independent auditor's report. Are there any questions or comments on the financial report of the directors and the auditors? Mary?
My name is Mary Curran. I'm a shareholder. I'm also representing the Australian Shareholders Association. With respect to the inventory, which is a key audit matter, I notice there's been a huge increase from AUD 3.7 million the year before last, AUD 18 million, up to AUD 66 million. So I think we'd like to know a little bit about that.
Concern would be that you have items in stock that could well be obsolete, and how are you managing that?
It's a really good question, Mary. I'll give an introductory comment and then let Oleg, and it's a question we get asked. It's a fair question. As I said, this market is moving so quickly, and our customers require just-in-time delivery. We have to make educated management decisions about that inventory so we can then deliver quickly. Based on that, we get the follow-on orders, as we just saw from Asia, in terms of management of it to ensure that we minimize or don't get obsolescence. Oleg, I'll get you to respond.
Thanks, Britt. Hi, Mary.
For those online that may not have the question, which is, I think, quite fair from Mary from Australian Shareholders Association, what's the goal with the AUD 70 million in inventory book value, which has substantially increased in the last 12 months? There is nothing in our inventory which we do not currently sell today, and that I do not see us selling for, I mean, in this business, you cannot say for any period of time, but for, I guess, as long as I can see. It's a fast-moving industry for sure. The inventory is held in a number of ways. Some of them are finished goods. Some of them are long-lead items, which will be the same across a number of different products. When we build the products, we try to make parts as compatible with each other as possible.
For example, batteries and drone guns are the same as batteries and RF patrols. When we build new generations of products, there are also similarities in parts as much as possible, like circuit boards and whatnot. We do not currently have concerns on obsolescence. It takes about four months for us to build. Larger things will take longer. That's because I'm giving you probably longer answers than you might have hoped for. An average DroneShield product has between 100 and 200 line items, which is referred to as BOM or bill of materials. Each one of those line items has its own lead time, and some of those have subcomponents attached to them as well.
When a customer comes to us, they expect something to be delivered fairly quick because usually they have an urgent delivery, whether it's to Ukraine or in South America against the Narcos or in whatever other means they can have or requirement they have. If you say to the customer, "Well, we'll give it to you in four months or six months," but especially larger order, the customer will say, "We love your DroneShield, but we'll go for an inferior product that has less lead time." Now you're basically competing on lead time as one of your key assessment criteria. In fact, when tender is often given to you or statements of requirements are given to you, the lead time is one of the assessment criteria.
If you do not perform within a certain lead time, you do not get the gig unless something else goes exceptional. Because of that and because we do not believe there is a meaningful risk of obsolescence, we are holding the inventory that we do. By the way, with AUD 100 in secured revenues versus AUD 57 million for all of us here, and we secured AUD 100 million for just the first five months, we think that the level of revenue increase versus the level of inventory increases is about right. All good? Nick, did you want to add to that?
Can I just have a follow-up question? Of course. With respect to that, and I noticed you mentioned that you believe you can pass on the tariff increases, right? Maybe what we could do, because we have people online, can we—oh, we have David's got a mic. We can—here we go.
Thank you. Yes, it's Mary Curran. Just a follow-up question about the stock. You mentioned, and Peter mentioned, you're going to hope to pass on the costs of any tariffs, right? You mentioned that you are supplying with respect probably in Colombia or somewhere like that. What I'd like to look at is the terms of trade. What level you've got outstanding bills and what sort of bad debt levels have you looked at or are you concerned about?
I'll get Oleg to respond to that.
Payment terms vary from 30 days after delivery. You'll need for customers where we have a built-up level of trust. Usually U.S. government, Australian government, and so on. That's a usual set of payment terms. They are, frankly, not really negotiable. You basically just accept what those customers pay you.
For more, let's say, esoteric customers such as South American and so on, we substantially request pre-shipment payments. We never had a customer, pretty much literally never had a customer, even including the Saudi, as a customer not paying us. I hope to keep it that way. We do not have bad debts or any current anticipation of a bad debt. As orders get larger, there is a possibility that in certain cases, we might end up doing a structure of staggered deliveries. Some payment terms may expand to something like net 60 to basically accommodate whatever structure of delivery happens. I do not expect any more slippage on any deals around the world longer than net 60 that I am aware of.
Okay. Marcia?
Just a follow-up on Mary's question. Marcia Moseley, I am a shareholder.
Your inventory is largely the obsolescence would apply to the software rather than the hardware involved in the—so can you, if you've got something on the shelves where it's become obsolete because of the software, can the software be updated on the inventory that you have on the shelves?
You're giving me an easy one, Marcia. Mary's much harder questions. Yeah, it's a bit like you have your smartphone. You basically just put the latest software into it. We have a—for the finished goods, before I was talking about partially built or goods in progress versus finished goods, right? For the finished goods, you might have X amount of, say, RfPatrols on the shelf, and then you would literally say have an order for 10 of them.
Our standard operating procedure is before those 10 get shipped to the customer, the field engineer would plug them in, update to the latest software, and ship them out. That is just the process how we do it. Software, I guess if you think about obsolescence in any financial sense, that does not really hit our books anyhow because, I mean, there is no cost to build, so to speak. I mean, the value is really hardware in terms of how we assess it, and it does not cost you anything to put the latest software in the device.
Okay. Any other questions on the financial statements and reports? All good? The first resolution is the adoption of the remuneration report. To consider and if thought fit to pass resolution one, the adoption of the remuneration report is a non-binding ordinary resolution.
The wording and proxies received are on the screen. If you wish to discuss this resolution, please raise your hand. Are there any questions? Mary.
I can't remember if I congratulated you on joining the ASX 300. What I'd really like to see— Be careful what you wish for, I think, Mary. Who knows? What I'd really like to see, and I know I asked you for this last year, is the actual remuneration report. I understand that obviously you have to publish the statutory one, but what I'd really like to see, given that you're now in the 300, is an actual report. That's one request. The next request is, and I made the request last year as well, that we have a shareholding policy. Again, that's best practice for an ASX company. We've got two directors coming on board.
I'd really like to see them buying some shares. I don't think they've already done so, but given the presentation today, I see no reason why they shouldn't.
Thank you, Mary. Look, in terms of—and then Marcia's got one as well, but let me just take Mary's two while I've got those. The first one, the remuneration report, what I can say on joining the ASX 300, as soon as we could see that we were heading towards it, we as a board met and decided then to appoint two new directors, and we'll talk about them in a moment. We set up an audit committee, which we didn't have. We also set up a remuneration committee to give that greater focus. We have spent a lot of time, particularly Simone and I and others, on the remuneration report this year.
There's a lot more in it, and I think you can expect to see Mary even more in it next year. The challenge we've got is managing the growth of the company, as you can see, and also reporting at the same time. Certainly, a lot more effort, a lot more time and formality has gone into the remuneration report this year, and I think you can expect to see more next year. The question of shareholding is sort of outside the remuneration report, but it's a very important one. I'll take the question now. If it goes on, we'll push it over into matters later. Certainly, I am a big believer, and I know my fellow directors are believers in what I call skin in the game.
Any business, I have been associated in many, and I think this is probably the fourth company I've been associated with as chair and director that has gone from small through to the ASX 300. It is fundamental, and that is across the executives and the directors. Terms, if you mentioned our two new directors, I think it's fair to say they're running up for re-election today. We will see how that goes. Although I can predict, I think they're going to get 99% support. After today, I think your question is quite valid, Mary. The other comment I would make is at any one time, the board may well be in receipt of price-sensitive information. There are limited times at which we can buy, but I can—and Simone, I'll get you to comment in a moment.
I can assure you that skin in the game is something I adhere to. I've never mandated it, never needed to. I don't think you should have to mandate it. Skin in the game is something that I support, and I know my colleagues do. Simone, do you want to just add to that?
Sure. Look, we do understand the importance of demonstrating alignment with the shareholder base. It is a live topic of discussion for the board. As Peter alluded to, we do also have to manage MMPI considerations and trading windows. As you can probably see from the results, clearly it's been a very strong start to 2025.
There has not actually been an opportunity to date in the context of the very strong and large contracts that have been flowing through where the board has felt that there has been a clear window in which we could be purchasing. Hence the challenges for us. Obviously, as an ASX 300 company, the independent directors are remunerated in cash only. It is a little bit difficult to do so, but we absolutely intend to demonstrate our alignment with the shareholders. Marcia, did you have a question?
In the same vein, the options and the limited recourse lines. I understand as a young company the need to use options for payment to consider cash. However, as we mentioned, you are now in the ASX 300, so it is time to grow up.
The problem I've got with it is with limited recourse loans, and we've seen this—this is what's happened—is that those with the options exercise the options at a very low cost, immediately sell them for a big profit. Now, I accept selling them after covering your taxation that's associated with it. The balance should have been retained in my view so that you exist, then you have skin in the game. Limited recourse loans, the problem with them is there are two outcomes. One is you exercise the options, immediately cash them in for a profit and repay the loan to the company. Alternatively, you keep the shares. The loan is ongoing, interest-free, and it's the company that bears the risk that the share price will drop. There is no real loss risk for the person who's exercised the options.
However, I understand that options are no longer going to be used for payment, and that's very much a step in the right direction.
Correct. Thank you, Marcia. Look, it's a good point. I think you and I have discussed this and others have as part of growing up. We can all look at what's got us to this point. I'd suggest what's got us to this point has obviously been reasonably successful in terms of where the company is today, but what takes us forward may well be different. We've already declared that non-executive directors will no longer be eligible for options. As we've discussed, Marcia, that limited recourse or non-recourse loans will no longer be applicable. Those two are in the past. Any other questions on remuneration? I did have some, I think, from a shareholder, but I will take.
From shareholder Stephen Main, was there a performance-based justification for the 99% increase in the CEO's fixed revenue? As I've discussed with many, with proxy advisors and shareholders, if you look at Oleg's salary package, his base in the years leading up to our raise, it was very subdued, and that is around AUD 300,000-AUD 400,000 per annum. That was simply because we didn't have the cash. Oleg and directors, we decided the company could not afford to pay in cash. However, as the company built and we got momentum and growth and moved towards the capital raisers, we did increase Oleg's salary package to just below base, below AUD 800,000. In fact, that was last year, and this year we've moved it to AUD 850,000. We believe, if you think about DroneShield, we're a global company, and we've been going for nine years.
That's as long as the industry's been going. Oleg is arguably the most experienced, if not one of the most experienced executives in this space. In the unfortunate event that, for whatever reason, Oleg left, we'd then be looking to do a global search, and I'm very sure that we'd be paying a lot more than what we're currently paying Oleg. Similarly, there was a question from shareholders about the one-off bonus that was paid last year. Again, it's a fair question of AUD 1.4 million. Again, if you look at the total package that Oleg got last year, just over AUD 2 million, having been arguably underpaid in cash for many years, given what has been achieved and what is applicable on a global market, the board felt, after consideration and consultation, that was an appropriate amount. Was shareholder consultation undertaken on the CEO fixed remuneration?
We talk to all shareholders as best we can, as often as we can. At the end of the day, it's up to the board to make these decisions. That's why we're in place. I'd also point out we've got 30,000 shareholders. We do our best. We take note of feedback, but at the end of the day, we make the call. The next question, what proportion of the CEO's short-term and long-term incentives actually vested last year? Of the STI, 100%. Of the LTI, none. Let's see what other questions. How does the board justify the size and structure of the performance-based equity awards? That'll actually come up under the later resolution toward Oleg, the performance rights. I'd suggest that AUD 200 million in annual cash or revenue is an aggressive, healthy target. Given last year, we achieved AUD 50-AUD 55 million.
My expectation is if we hit that, everyone will be very, very happy. Shareholders will be happy. Okay, let's then move on to there being no further questions on the remuneration report. I now put the motion. Those physically in attendance, please mark your voting instruction on our yellow voting card. Those attending virtually can vote via the online portal. All good? Resolution two is as follows: to consider and, if thought fit, to pass resolution two, the election of Simone Haslinger as a director as an ordinary resolution. The wording and proxies received in relation to this resolution are on the screen. Let me say I'm delighted to have Simone on board. She's dived in and been thrown into the deep end and has been on many calls with me, with proxies, shareholders, and brings several things to DroneShield. Firstly, many years of experience in equity capital markets.
Simone knows how those markets tick on M&A and a very broadly based business executive. I must say, Simone's style, along with the rest of the board, is collegiate but questioning and is always available to take a call or to have a meeting. I am going to ask Simone, as is traditional, to say a few words in support of your nomination. Simone.
Thank you, Peter. Hi, everybody. I'm honored to be standing for election today as an independent non-executive director of DroneShield. As Peter outlined, I bring 20 years of investment banking experience at J.P. Morgan and Deutsche Bank, where I advised clients, particularly in the ASX 300, across a range of strategic and capital situations. As Peter mentioned, I was a specialist in the equity capital markets area.
As such, I was involved in AUD 70 billion of equity raisings and have experience across all of the work that goes into such a transaction: structuring, due diligence, governance, market communications, and distribution. I also act as a non-executive director of National Storage REIT, which is an ASX 200 entity, Australia's largest owner and operator of storage assets. I am a member of the Australian Institute of Company Directors. I bring large-cap corporate finance, market governance, market communications, and investor relations experience, lots of experience dealing with institutional investors and shareholder groups. I bring a commitment to transparency, accountability, and acting in the best interests of shareholders. It has been an absolute pleasure to work with the DroneShield management team and the rest of the board over the last seven months.
It is a phenomenal business going through a huge growth phase and expansion phase, and it is navigating complex markets internationally and transitioning to the ASX 300. If elected, I will continue to support management and provide robust oversight. I thank you for your consideration.
Thank you, Simone. Are there any questions? Mary?
Not really a question, but it is more a comment for both of the new directors. We have discussed it that we need a board skills matrix with everybody on it so we know what gaps we are filling. If we could have that, it is noted that you are doing it, but if we could publish that so we know when we have got the new directors coming on board, what new skills they are bringing so we do not have the same people bringing the same skills and then we are lacking in a skill.
You also mentioned if you would just elaborate a little bit more maybe on the other people that you liaise with when you're out there in the marketplace looking for business, just as a general broad brush.
Thank you, Mary. Again, a good point. Our world-class Company Secretary down the back there will make a note that next year, Paul, we will have the skills matrix in our annual report. Looking at making sure we've got that map of skills covered is obviously fundamentally important. In bringing both Richard on, and Richard will speak in a moment, and Simone, we just looked at those gaps. What we've talked about as well, we do have advisory boards, and they are typically staffed with, not always, but ex-military, very senior ex-military people.
We find, depending on the market, depending on the particular opportunity, we can bring expertise to bear. If you look at the people, for example, we have in Australia, these are some of our most senior ex-generals, their commodores, very, very well connected into the military. We might know how to run a business. We might know about tech and everything else. At the end of the day, having those skill sets available in Australia, for example, on land 156, we have leading-edge relevant skill sets. In the U.S., we have on our management team, ex-military, the senior salespeople that we've just deployed in Denmark are ex-military. We are looking at this skill set, Mary, as a matrix, and we bring particular expertise to bear into a market or into an opportunity. I expect that that will evolve.
Certainly, in terms of the skills matrix, we will have that there for next year. Okay. I now— Excuse me. Yes, sure. Is it possible to turn the volume up a little bit? Yes, of course it is. But if someone can tell me, maybe I need to speak a bit closer. I think when the directors are speaking, sometimes it's quite subdued. Okay. Thank you. Directors, please take note. I now put the motion. Those physically in attendance, please mark your voting instruction on your yellow voting card. Those attending virtually can vote via the online portal. However, I remind you not to click on next until you have selected your vote for all resolutions. All good? The resolution three is as follows: to consider and, if thought fit, to pass resolution three, the election of Mr. Richard Joffe as a director as an ordinary resolution.
The wording and proxies received in relation to this resolution are on the screen. Firstly, let me say a few words in support of Richard. I must say, Richard, I normally see him in a black T-shirt, but for us today, he's certainly got propped up. Richard has significant experience on the global stage, particularly North America, in scaling up businesses, tech businesses, and already has a number of successful exits to his credit. I think it's to our credit that we've been able to attract someone of his caliber. He has his own business that he lives and breathes, but he also is very committed to DroneShield and has already been very insightful in board and strategy meetings about the issues and opportunities of scaling a tech business. As with Simone, I'll ask Richard, could you say a few words in support of your nomination, please?
Thanks, Peter. I'm super excited to be here today and really excited to hopefully get to work with the management team and the other directors. I have about 25 years' experience in the technology industry. I started off at McKinsey and then at Morgan Stanley doing tech M&A out of New York. I cut my teeth, and then I built three companies. The first one was similar in many ways to DroneShield. It's a hardware-based company that we were trying to move progressively more to an annuity stream. Started in Australia, became 90% global with offices, about half a dozen countries, distributors not dissimilar to DroneShield in about 20 countries. It was a great success story. It was called Parkesis.
You used AI and data science to figure out the first line of your car system in the world, where empty spaces are when you're driving around, like shopping malls and airports. You might have seen the systems and sold that to a big Siemens competitor out of Europe. The second one was called Stella, and we cobbled together really a world-class team of folks from the Pentagon and NASA and other places who are data science, so AI experts. We had about 50 of the Fortune 500 in America working with us. We spent a lot of time in enterprise working to both collapse sales cycles and kind of work in that environment that was mostly US-based.
That company was also sold successfully and then moved to Australia from San Francisco six years ago and built this company now, which is called Honey Insurance, which is home insurance, again, very data science-centric and AI-centric with smart home sensors to try and move that industry forward in Australia. Last year we were the fastest-growing technology company in the country, the fastest-growing insurance company in the country. Again, have a wonderful team that we're scaling locally. I'm super excited about what's happening at DroneShield. I think it's really kind of a national gem at this point, I think. There are so few companies in the defense industry that we can be proud of, I think, that are on the global stage.
To the extent that I can help with global expansion and really putting us on the map, I think, domestically, I think it's beyond DroneShield. I think it is an important problem to work on and an important industry to help lead. Anyway, thank you for your consideration, and I'm super excited.
Thank you, Richard. Any questions? All good? If there are no further questions, I now put the motion. Those physically in attendance, please mark your voting instructions on your yellow voting card. Those attending virtually can vote via the online portal. Okay. Resolution four, the approval to increase the maximum aggregate amount of non-executive directors' fees. To consider if we're to increase the maximum aggregate amount of non-executive director fees as an ordinary resolution. The wording and the votes are there on the screen. Are there any questions? All good?
Those physically in attendance, please mark your voting instruction on your yellow voting card. Those attending virtually can vote via the online portal. Resolution five is the adoption of the incentive option plan. The resolution wording and proxies are on the screen. Are there any questions? All good? I now put the motion. Those physically in attendance, please mark your voting instruction on your yellow card. Those attending virtually can vote via the online portal. The next resolution, six, is the issue of performance options to a related party, Oleg Vornik. The wording is on the screen and the proxies as well. Are there any questions on this matter? Okay. I now put the motion. Those physically in attendance, please mark your voting instructions on your yellow voting card. Those attending virtually can vote via the online portal.
Resolution seven, ratification of prior issues of shares under Listing Rule 7.1. The words and the proxy votes are on the screen. Are there any questions? I now put the motion. Those physically in attendance, please mark your voting instructions on your yellow voting card. Those attending virtually can vote via the online portal. A few comments about the conducting of the poll. That concludes the resolutions to be voted on today. As noted, we're conducting a poll on all resolutions. I note that the poll is already open. Can all shareholders voting online please now ensure they have submitted their votes. I'll allow another minute before the poll is closed. If you have any questions in relation to the submission of online votes, please send them through the Q&A function now.
For those shareholders attending physically, I now invite the staff of Automic to collect the voting cards. All good? So all persons that intend to vote have now submitted their cards. The staff of Automic will now process the poll. The results will be announced to the ASIC once they are available. Any other business? Is there any other business that can be lawfully brought forward? Marcia?
Yes, succession planning. One of my favorites, particularly for a company like DroneShield. We obviously have the potential to have a key man crisis. In relation to that, following on from that, have you got an active succession plan? Perhaps to promote that, make it part of the STI, that it be part of Oleg's STIs that he actually is actively encouraging a successor.
Following on from that, given that he's obviously a key man and there are other key personnel, you travel a lot. The security of our personnel is another thing that I've got to think about, particularly with a company like this. It's obvious that there would be security issues for your personnel. Is that adequately dealt with?
Thank you. So far, so good. I'll grant that. That's good. Look, let me take the second point first. It's something that we don't want to overstate, but it's something that we are well aware of. As you probably know, there have been sanctions issued against Oleg and other key personnel. For the board, our addresses are suppressed just because of the nature of the work that we do. We do take security very seriously. A number of our personnel are ex-military.
From time to time, if they are in areas which are, shall we say, sensitive, typically we will have ex-military people do that. Gone are the days when it was just Oleg and I having to do it. It is something that we take very seriously, a whole issue of security. I'll leave it at that. The point of succession, again, is something that we talk about often. I think personally with the board, expanding the skill set of the board at board level. In terms of Oleg, there are a number of people who would be very hard to replace because of who he is and experience. There are a number of people, senior executives who have either been in the company for quite a while or have been recently appointed. It is something that we give a lot of thought to.
Your point about the STI, I'll take that on notice. I won't necessarily make a comment, Marcia, but it's a fair point. Are there any other questions? Otherwise, I'm keen.
Sorry. Just one more. Now, I'm assured that your cash situation at the present time is adequate, more than adequate. But in the future, do you intend to have further revenue rising to near AUD 4 in the company, take on modest debt levels, or a combination of both?
The short answer is no. There's certainly nothing anticipated at this point at all. You can see the obvious reason why. Let me say, debt in a company like this is something I personally would prefer not to do, but there's nothing on our horizon today as we stand here that would lead us towards either a capital raising or to debt. Thank you. Okay.
Look, with that, what I'm going to do is close the formal part of the meeting. I think hand over to the person perhaps you really want to hear from. That is Oleg to tell you about all the good things and, importantly, not only those that have happened, but are about to happen. Oleg, thank you.
Slide, please. We're having a technical issue with the slides that we'll resolve momentarily. Let me entertain you with a general commentary while we're trying to solve it. Me and my team are humbled and honored to be where we are in this journey. It's been close to 10 years of right of our lifetimes. I think it's fair to say that.
All of us have and continue to be having truly once-in-a-lifetime experiences, and being part of the DroneShield story and shaping it has been the most incredible thing that happened to me personally, and I think is the case for just about every employee of DroneShield. When we began, people used to say, "Why do you bother looking for detection and takedown of small drones? Those things are toys." We had the vision that warfare, terrorism, and all kinds of other nefarious activity was going to utilize the latest technology, and small drones could be used as affordable means of carrying surveillance, delivering payload, and so on. I think it's fair to say, and for those of you in the room that have been with us on the register for some years, that it took much longer than everybody expected for this to realize.
I think we all wish that everybody started buying counter-drone equipment maybe five or six years ago. Yet it took, unfortunately, a tragedy of a scale of Ukraine war in order for the market to really wake up and see the potential of small drones. Those following Ukraine will see that both the Russian and the Ukrainian armed forces are using drones extensively on the battlefield. There are literally thousands, if not tens and hundreds of thousands of small drones deployed at any particular point in time. If you think about the comment I just made, this is incredible to have many, many thousands of drones in the air at any particular point in time conducting missions. If you're a human on the battlefield today, it's an incredibly dangerous place.
For example, one of the comments that we get from our customers in Ukraine is that our devices like our RF Patrol, which are body-worn drone sensors, really make them feel psychologically safe. Now, why is that? Here in Sydney, you might be on the beach, you hear that annoying overhead buzzing sound, you look up, you see a drone. Okay, it's a bit annoying. In Ukraine, if that happens, chances are you're about to die because the drone saw you before you saw the drone, and it's homing right on you. Regardless of where you are, in a trench, in a building, it will go for you with the explosive attached to its nose. It's a very, very serious situation. The ability to detect and take down drones is absolutely critical.
We also believe that this will go past just the military adoption into the civilian space, airports, stadiums, data centers, and so on. This would be in the next couple of years. The question then will be, who is already well deployed across the space? There are lots of examples in technology where it started with the military and then went into mass adoption in the civilian space. Internet is one of them. DARPA invented and then used by everybody today. We think the same will happen to counter-drones. For DroneShield to have become an Australian-based global leader in defense, which is by itself an unknown thing, people accept that there might be US, European, Israeli, etc., global leaders in defense, but for an Australian company to do that is, in my experience, fairly unheard of.
Being at the edge of innovation is unusual, and we're really proud to continue to do this. Today, any Western customer looking to procure a counter-drone solution will probably have DroneShield in the top three. Who the other two are depends on whether it's handheld, vehicle, fixed-site solution, depending on where they are and so on. I would say we're truly a global brand today. I'll step into the presentation. The numbers on the key highlight slide speak for itself. We have a rapid increase across all benchmarks. We have, for the first time, and this number we unveiled this morning when we released this to ASX, crossed over AUD 100 million in secured revenues for this year. We are five months into the year.
If you think of last year, we had AUD 57 million of revenue for the whole year, and that was already an all-time record revenue year. You look across all the other key metrics, such as pipeline of opportunities. I know some of you have been probably frustrated with me and the team in terms of conversion of pipeline into the revenue. Trust me, we are frustrated too, and we wish that a lot more of the pipeline was converted sooner. Yet we have always been seeing that larger pipeline does translate into bigger revenues, and that has been the case for all of our 10 years of existence. In defence, you do have multiple years of lead time before you get sales. Once you have them, it's sticky situations, and customers keep placing larger orders.
For example, the AUD 32 million order that we received from an Asian customer last month was about two years in the making. It's a bit like wine vintages, I suppose. Now we are cultivating a number of those, in fact, about AUD 2.3 billion of those that we expect to convert. If they do not convert in the next year or two, chances are they'll probably get deferred in some other form. Being in those opportunities, which are usually, by the way, not tenders for security reasons, a lot of our customers do not just openly tender to five parties or so, but rather go into direct engagements, we will capitalize on opportunities with those customers. I believe that we have the world's largest dedicated counter-drone engineering team at about 217 engineers here in Sydney.
We expect that to grow to close to 300 engineers by the end of the year. Why? Because the drone warfare is continuously evolving. I would say that we're not competing with other counter-drone makers. We are competing essentially against the Chinese government, which is taking its electronic warfare-sensitive technologies and, from what we can tell, essentially giving it to the Chinese drone makers such as DJI and Autel, who are then embedding it in what seems to be an unending stream of increasingly difficult-to-detect and defeat drones. Five years ago, when a DJI drone would hit the market, it would generally be focusing on things like, how does it fly the longest distance? How does it carry maximum payload it can? How does it see things further it can?
Now we're seeing specific features coming in drones which are designed to avoid detection and defeat by counter-drone systems, which means we have to get smarter and innovate all the time. Fortunately, our customers do not expect us or anybody else in the counter-drone world to be 100%. It's not quite the same as antivirus because the customers understand that it is physically impossible. You can stop the vast majority of them. Maybe 99.99% kind of success rate. Generally, the more layered system you have, for example, you have maybe detection through radio frequency sensors, radars, cameras, defeat through multiple ways, the more you increase your probability of detection, reduce your false alarms, increase the chance of defeat, and so on. That is also why we're both a technology maker and an integrator.
I guess it's a bit like an Apple model where you offer an ecosystem as well as the ability to be part of other people's ecosystems and integrate other people's kit into our own gear as well. Slide, please. I don't think I need to tell anybody today that we're living in probably the most uncertain time for geopolitics in history. The tyrants around the world are realizing that the Western-based rules order may not be the only way to live. They may well have a crack and see how far they can get away with using might is right philosophy. We're seeing this in Russia. We're seeing this in China and North Korea and so on. With it is the adoption of latest technologies for both battlefield, but also harassment, intimidation, gray zone warfare.
Drones are a key part of this because you basically have the ability to take what is a fairly low-budget instrument and have pretty terrifying consequences with it. Also, interestingly, drones are one technology where China is leading. Historically, if you think about the technological innovations, most of them have been led by the West. We think about computers, cars, and so on invented in the West, Chinese copying. Drones, small drones specifically, are something that is essentially invented by China. China has by far the biggest lead in the technology. The West is now playing catch-up. It is very important to make sure that the counter-drone technologies stay at the edge of the capability and do the best job we can. I think it's fair to say that drones will continue playing a major part in every warfare or conflict going forward.
With it, you will need a lot of counter-drone technologies to basically defend yourselves against the drone threats. We live in a geopolitical situation which is unlikely to be peace across the world, really, in my opinion, anytime soon. Slide, please. We said there's roughly a $10 billion U.S. addressable market. Now, what does it mean? How does it translate into revenues? It's difficult to assess. I think we have the ability to continue significantly growing our revenues year -on- year, every year. Military has been the biggest part of how we sell, basically, because they're early adopters. The same thing for border security intelligence communities. The civilian market has been slow, like I mentioned before. Airports probably are the biggest prize for us right now. We hired a dedicated senior executive in Sydney from Smiths Detection. These are X-ray machines and airports.
He understands the airport security landscape really well to run our global airport strategy. We hope that between that and evolving our product suite to specifically focus on the civilian sector, we will be able to start penetrating into that environment. Slide, please. Most of you will know our product suite. Essentially, two families of products, being the handheld products, being our RfPatrol, body-worn drone detector using radio frequencies, so listening for communication between the drone and the controller, and DroneGun, which essentially scrambles our communication and enables safe defeat of drones. Then the on-the-move, on the boat, on a vehicle, on a rooftop, DroneSentry solution, which is also an integrated system which enables third-party kits such as radars and cameras and acoustic systems and hard-kill solutions if required by the customer that we also sell.
Now, the interesting thing on this slide is, as you guys will see, historically, most of our sales have been portables, and that's continuing strong in dollar terms. However, the fixed-site and the on-the-move solutions are increasingly large. We're now more than half of our total revenue being in those fixed-site solutions. Now, this is exciting for us. The margins are significant. I mean, we operate on a 70% gross margin across the board. If you look at our historical financial information, the dollar values of fixed sites are in hundreds of thousands of dollars to millions. For the portables, it's tens of thousands of dollars per system. So the dollar value of those fixed-site solutions is, in opportunity, significant. I think we'll continue to have that as very much our kind of market-grabbing strategy while we'll sell the portables as it goes.
Now, I think with increasing sophistication of drones, it will be inevitable that the systems will have to get larger. I noticed one of the questions online was around, well, what do we do about all kinds of evolving drones? I talked before about Chinese drones operating deliberately to avoid traditional detection and defeat. With that, as we work on next-generation products, those will generally get larger, which will naturally push us into not so much handheld, but a mixture of rapidly deployable and fixed-site type solutions, and that will become market standard. Those will be larger dollar value opportunities. Software. My aim is, over the next five years, to become as close to 50% in software and software-like revenues as possible. Today, if you look at our SaaS, it's great.
It's roughly sort of doubling on every opportunity, but it's still about 5% of our total revenues, which is small. That's a reflection of a couple of things. One, our products like drone guns, which is one of our best sellers historically, do not receive software updates by the way they were built. An elegant solution, but does not receive SaaS. Secondly, we have very few actual software offerings. Now, what we're working on now is next-generation products, which will have each up to multiple subscription opportunities. We offer now subscription standalone products like our command and control system, which basically stitches together various sensors and effectors. Between things like what you see on that slide, RFII, which is basically artificial intelligence-based brain of our radio frequency sensors, it enables you to detect a threat even if you've never seen it before.
We have dedicated data and engineering and data annotation teams. With AI, there will be various degrees of familiarity in the room and online about it. It is not so much about writing algorithms, but about having clean, well-tagged data sets. We have been accumulating drone data sets for a number of years now. Drones in Europe, in the U.S., and Australia, in Japan, they all sound different in those places. That continuously gets updated because our devices can send you data from customers with their consent. We also record quite a bit of our own data, as well as generating synthetic data. Own data is always best before you kind of supplement it with synthetics to continue the ability to detect those unusual drones. The great thing about, and I will talk about our differentiators.
Commercially, one of our differentiators is our close relationships with end customers. That means we're able to have end customers coming to us and saying, "Hey, I've seen this unusual drone on the battlefield or in a particular situation. Here's a recording," or, "Here is a particular drone. Can you please make sure that your AI learns from it? It can detect it and track it." That's quite important for RFII, which is a subscription product. When you buy our hardware like RfPatrol or DroneSentry-X, you subscribe and continue to receive the updates on a quarterly basis to RFII with the latest AI engine. DroneSentry-C2, I already talked about. A C2 on a subscription basis essentially plugs a number of sensors and effectors together.
It will be important as we continue to emerge as an integrator as opposed to just a sensor maker. Being an integrator is strategically important in terms of revenues, in terms of margins, because it is a bit like you are the windows of the counter-drone system, so to speak. You control the gates of who gets in and how. We want to be in as much of control of the ecosystem as possible through our command and control system. Electronic warfare, which was, thank you, which was the last bit on that slide. I cannot talk too much about it as it is sensitive work, but it is very related to our counter-drone work. We are currently in the process of completing a two-year, AUD 10 million contract and looking forward to hopefully receiving a larger renewal contract. The existing one completes end of June. Slide, please. Other way.
T hank you. Sorry, we've got a question.
Can I ask a question? Just wait for the mic, please. You said you've got 207 engineers. You have to get a 300 body. You've got 207 engineers. You have to get a 300 body engineer. That is fabulous. The problem is training them. When you get—I've got the—my son says he's got the—he's in his late 30s. When you get a whole stack of new staff, he can't do his own job because you have all these young engineers. They keep on—even they'll come to you or your people working for you and say, "How do I do this?" Listen, then you can't do your job. Increasing 50%. I don't know what he meant by December this year. Wow. That is so big. I noticed the Chairman's nodding. That's not easy in any organisation. That's the one question.
The other one is, do you make them come into the office? Because I'm sure you find, if you work in isolation, you don't have to think as well. You have someone of your own colleagues. It stimulates your own thoughts. It's two questions. Thank you. Onboarding of new engineers is, thankfully, not my personal issue, but it is an issue for the team. The answer is you just have to harden up. We try to build better systems, as a lot of it is about systems, on how do you train at scale? How do you get people better? How do you manage people at scale? I mean, there's all kinds of related things, like, for example, how do you set the right team leads? How do you train the new team leads? How do you set performance benchmarks?
is a whole organizational theory about any organization breaking down at certain points, like 30 people, 100 people, 300 people. We have been breaking through multiple of these points within a space of 12 months. Look, I do not want to kind of beat my own drum, but what we do is insanely difficult, in every possible way. The technology, the growth, the sales, there is nothing easy about this business. What you highlight is very relevant, but it is probably one of 20 top-tier issues that I deal with kind of every day. It is just hard.
Maybe if—because I was nodding my head about this particular issue, and I know it is something the board talks about, and I know Richard lives this, but perhaps not on this great scale, bringing those new people in and getting it to scale and getting process in place.
You also made a comment about people wanting to come into the office. What I observe is the camaraderie, goodwill, and excitement because what young people want to work in on, particularly tech, and I alluded to it before, firstly, they want to work on leading-edge tech. There is nothing more leading-edge than what we're doing. They want to work doing good things, and we are saving lives. I mean, that's what DroneShield does. Oleg talked about the fear on the battlefield, and we've had Ukraine soldiers come in and talk to us about that. Doing good things, working for an Australian company, and employing Australians by and large. The sense of camaraderie and just the positive goodwill that emanates from the team. Certainly, the times I've been into the office, there's a buzz. People want to be there, want to be part of it.
As Oleg said, and we all know, bringing them on board, getting alignment, scaling is a real issue, one of the many issues that Oleg and his team have to grapple with.
Can I just ask one question too? You're doing your recruitment on a large scale. The security checks on the staff that you're bringing in, are you really confident in the quality of the security checks that are being done?
I'm confident. I can't really talk about what we do, but there are a number of ways in which we deal. Some of them are in collaboration with the Australian government, and some of them are our own, basically, checks using people who are experienced with this sort of thing from their previous jobs, if that helps. On people in the office, generally, Monday to Wednesday, everybody needs to be in.
I think, genuinely, people enjoy it, especially if you're relatively new. You need to be around others. A number of people work four-day weeks. Many, especially if you're on things like production or quality assurance, it's kind of hard to do remotely, working five-day weeks.
Slide, please. There are two types of differentiators that DroneShield has: technical and commercial. On the technical front, we've been at it for just about as long as or longer than anybody else, and with a larger engineering team than anybody else that I know of. That means that, as a result, you've basically been banging your head against the wall for longer than others and getting your customer inputs for longer than anybody else.
In the beginning, you kind of have to sit around the table and think, "Okay, well, what do customers want?" Now we're fortunate in that we have two years of technology roadmap, all specifically from multiple pieces of feedback from end customers. Usually, you can triangulate priority because if you have several tier-one customers who are all asking for the same or similar thing, then you're kind of saying, "Well, this is really important." We know what we need to work on. Just through our past and our capability, we're able to see further than others, less false alarms, defeat better, and so on. Technically, products tend to be better than competition. We're seeing this why we're not always the cheapest. There will be cheaper products.
We're seeing that especially in more, let's say, contested markets like South America or Southeast Asia, where some customers will buy Chinese if it's better priced and, in theory, better performance. We are still winning the business due to the performance of our products. Commercial differentiators, so I talked about technical differentiators. Commercial differentiators are basically the reputation we've built in the market. We, unlike many others, have always been conservative on our specs. We have not been snake oil, and customers basically expect the product to perform as it says in the box, which, in experimental new industry, actually accounts for quite a bit. We have really experienced senior salespeople who are able to build trusted relationships with end customers and keep developing their pipeline and so on. Customers give you feedback and response.
You use that to improve your products, and customers have a greater sense of ownership in the product and so on. You have a virtuous cycle going. Because of that, branding is very strong. Like I was saying, any Western customer, I would say, looking to buy a counter-drone system will probably have DroneShield in its top several parties it's looking to buy from. Slide, please. As you can see, we are progressing well on the revenues. Cracked the AUD 100 million secured revenue threshold, being five months into the year. Cash receipts, the chart does not quite look the same way as the revenues, but it does not quite show the same thing in the sense that on revenues, we are able to show as you go.
For cash receipts, we normally just do it on quarter by quarter, but we are anticipating a strong second quarter of cash receipts. The main difference between why the revenues were stronger than cash receipts for the first quarter was because we talked before, we get paid for a lot of customers with a slight lag, about 30 days. A lot of revenues that you recognize when you deliver in the first quarter, then you get actually paid for them in the second quarter. We will be releasing those numbers in July with the foresee. SaaS, relatively small, like I was saying, 5%, but increasing quickly. I hope that from next year, it will really start going much faster quickly or much larger quickly as the next generation of products start to kick in. Strong gross profits.
We're not really in the industry where, if you do a 5% discount, you'll suddenly have double the revenue. Customers are buying because of capability. You can't really be stupid about pricing. It needs to be ballpark in line with what the customer might expect. It's ultimately about capability play, not the price, because we're so highly differentiated. Slide. This is a pretty detailed design, more for people reading it at their own leisure. You basically see the business becoming larger but also more diversified. Peter made the comment about diversification of our revenues. Today, we have roughly three strong regions. US, which used to be once upon a time essentially all the company was about, is still a very strong segment for us. We have a phenomenal US team, and I think we'll continue having very strong traction in that market.
Europe is now our biggest source of pipeline, and I think will be very meaningful in the near term and essentially almost same size as the US opportunities at the moment in terms of revenues that we have year to date. Also, Asia-Pacific coming very strongly, almost the same as U.S. and Europe. Much more diversified business and also diversified across products, like I was saying before, rather than just a portables business. We are now portables and systems business. The sales pipeline slide essentially summarises what I just mentioned, where it is a bigger diversity. We will be developing our European presence significantly over the next 6-12 months.
We're looking to put a sales office in the Netherlands because it's essentially an international location, English-speaking, where we can service a lot of Europe from, and also set up a dedicated production facility in Europe as well. We're finalizing the location of that at the moment. It's going to be essentially a center of excellence with a number of features such as R&D collaboration and so on. That, we hope, will further increase our European sales. Technology roadmap. Roadmap is something, believe it or not, we update on a weekly basis, although we don't tend to pivot significantly. The pivots are not really pivots. Any significant changes tend to happen more on a semi-annual, annual basis, but we update the roadmap weekly, given how rapidly the drones are evolving themselves. We have essentially two parts to our technology team.
One works on our existing products and ensures that they perform best they can with the quarterly software updates and any sort of tweaks batch to batch that need to be done. The majority of the tech team are working on the next generation of products. When we're talking about 220 engineers, the majority of them are working on things that you guys will be seeing coming out next year that we're really excited about and that we think will really be peerless in the market. Slide. The last slide on our strategic priorities. There are a number of different things there, essentially growing the pipeline, continuing to become geographically diverse. We are seeing a number of our customers in the current uncertain world looking for localisation. We are being very careful about it. Essentially, local manufacturing as opposed to everything being made in Sydney.
We made a step and continue to go there for Europe. We now have demand for similar things elsewhere, but we need to have an economic case justify essentially the effort and the complexity of the business before we set up local manufacturing elsewhere. We will be truly becoming, in terms of the hubs of sales teams and so on, a more and more global business going forward. Like I was saying before, software becoming increasingly more as a percentage of revenue, hopefully as much as 50% by five years from now. I'll turn to any questions.
Just one thing. Trying to establish yourself in Europe. I'll just say one word. Wow, that won't be easy. You're going to employing mainly Australians here because you've got—I don't know how many Europeans—but suddenly having a branch in Europe.
Is this a concept that we've really thought about actually doing it? That won't be easy. How many people are you going to have there? Dear me.
We operated our US office essentially since the inception of the company. Now, the difference is that we do not manufacture in the U.S., but we do conduct R&D in the U.S . There is some complexity. It's not just a straight sales office. In terms of, I suppose, working with people remotely, dealing with time zone differences, we're used to it. I spent two years in the U.S. as part of scaling the U.S. business. I think I'm about to probably relive the same with Europe. I think it's important to have an adult in every office, at least one. We've learned from a number of expansions in the past.
We already have experience in Europe through a couple dozen in-country distributors. And we all have spent a lot of time in Europe through working with those distributors and selling into Europe. Like I was saying, Europe is now our second largest or very similar to the U.S. segment. So we have experience selling and so on. It is not going to be just essentially setting up an office and hoping for the best. We are familiar with dealing with things like cultural differences. For example, one thing that we have learned over time in the U.S. is while Australians and Americans are very similar in many ways and much more similar than a number of other nations, there are important differences, and you have to be attuned to those. We are now basically taking all the learnings. It is not going to be easy.
Just like onboarding engineers and so on, it's not easy. Maybe if I can just add one comment, we could follow the management textbook and take 10 years to do this, but the market opportunity is there. The Europeans, as I've said, with U.S. directives coming up, Europeans are now starting to arm up for themselves. They are also saying the contracts will go to those companies who manufacture in Europe. We have the capital. We have a degree of expertise. Eyes wide open. This is not going to be easy. The opportunity's there.
Morning. You spoke about manufacturing in Europe. Are you looking at software as well as the physical hardware? The question was whether we're looking to manufacture software in Europe or just hardware. Initially, we just hardware.
Over time, again, as part of the localisation situation, I'm imagining there will be situations where some of our European customers will want to have essentially modularized software that includes what they're contributing. That is not the immediate focus. Immediate, right away, it's just going to be hardware. I'm interested in the EonLynx shareholder. I'm interested in the education system doing its part in terms of providing a source of well-educated specialists that you can engage with. Are you taking people that have previously worked in these sorts of highly skilled technical areas, or is there a mix of straight out of university?
We're high graduates. We are mindful, though, that you need a certain ratio of experienced people to graduates for everybody to get a good experience. Otherwise, it simply would not work if you have, for example, a one-to-one sort of ratio.
I find in Australia, we have an amazing educational system. But then, because there's no ecosystem like there is in the U.S., like there's no SpaceX, there's no Tesla, and so on, we don't really have a lot of highly capable, especially hardware engineers with that sort of 10-15 year work experience, which is a great advantage that the U.S. has because there's just such a lot of industry. Now, the flip side of it is we're not competing for talent with any of these companies because if you're in Australia and you're dealing with hardware, apart from maybe some medical devices companies, there's really nobody else to compete with. And even they would be very different to us. Like Cochlear, I mean, we hire from them, but we're not really competing with them.
MedTech is actually very good hiring ground for us because you have that sort of same mentality. Like if you have a heart pacemaker, it cannot fail. So similar accounting drone system cannot fail. We find that we end up hiring both grads and people with a certain amount of experience. We always go to Australia first before we go overseas for bringing into Australia, although we do sponsor people. We essentially train them for specifically what we're looking for. We operate at a level of complexity where we find, frankly, we just can't find plug-and-play engineers. It has to be you kind of hire for demonstrated capability, mindset, etc., and then you try to rapidly bring them up to speed. Thank you.
Hello, Robert Judd, shareholder, an ex-service provider of DroneShield.
Does Australia remain an attractive place to conduct R&D now that you're considering moving operations into Europe, especially taking into account the R&D tax incentive?
I think so. When I say we are looking to do operations in Europe, this is manufacturing. Manufacturing is a relatively low-margin business. Primarily, the reason we do this is because in Europe, you now have things like 65% local content for some of the opportunities we're seeing, right? Manufacturing is a 10% gross margin kind of business while we operate in a 70% gross margin business. The reason we do it there is because we want to basically utilise the R&D we're doing in Australia and sell it in Europe. Local manufacturing happens to be how it's enabled.
I did bring up, which is, I guess, what you're asking, things like collaborations on the R&D front and so on. Those will be there, but it's not the primary drive. I mean, the way I see this is once upon a time, we used to run R&D almost in two streams. We had an R&D team in the U.S. and an R&D team in Australia. It was awful. They used to fight, terrible politics, compete against each other. We put a cross on all that and said, "No, no, we're going to have one centralised R&D team." For a number of reasons, including R&D tax incentive, it makes sense for it to be in Australia. That is the plan. Australia will always be the heart of R&D for DroneShield.
There will be tack-ons to it in Europe and other places that will essentially be enablers for us to sell in those markets. All good?
Thank you, Oleg. Are there any other questions? I do have a number that have come in online from shareholder Stephen Main. I'll just quickly go through those. Can the board provide a breakdown of how many retail investors participated in the SPP, the share purchase plan? How much was raised compared to the institutional placement? AUD 15 million, I think, as you will recall, versus AUD 220 million through institution, and approximately 14,470 participants in the SPP. The next one, how many shareholders currently hold fewer than 1,000 shares? 1,795 as of 22nd of May. Would we consider a low-cost sale facility? We're not considering that at this stage. What percentage of the company's issued capital has been allocated to staff?
6% of fully diluted shares. Next question. Only 20% of directors and senior execs are women. Will we have specific gender diversity targets? The short answer is we're not seeing specific gender equity targets, but you can see that we are moving as best we can in a small company towards increasing diversity. And certainly, Simone's welcome addition to the board, I think, is testament to that. The next one, have we made any political donations or lobbying payments in Australia or overseas in the last 12 months? No, we have not. The rest of them, I think we have covered. So look, that brings to a close today's meeting. Thank you all for your attendance, for your interest. Hopefully, you get a sense that this is a company that has achieved great things. We're on the transition, certainly coming through the ASX 300.
We understand the additional transparency, governance, and reporting requirements, but we also understand and are taking as best we can full advantage of the many opportunities. You'll get a sense that Oleg and his team know what they're doing. They're very experienced. Eyes wide open. I don't like hubris in a company. I think they're proud, but they're certainly not unduly overly—well, they're ambitious, but they don't let ego get in the way of what they're doing. They're very humble. As I said, I think we can all be proud. It's taken nine years to become or to achieve overnight success, but this is just the beginning. A lot of hard work. I'm sure there'll be ups and downs, but a lot of excitement in the company.
Thank you all to my colleagues on the board who are always there for us, and certainly to the auditors and the various advisors, to our customers, but most importantly, to shareholders. This is your company. Thank you. Have a good day.