All right. It is 10:00 A.M. Sorry, it's 8:00 A.M. So good morning, everybody. My name is Clive, and I'm the CFO at EOS. Today's webinar is a brief recap of our ASX announcement yesterday morning on a high-energy laser contract. On the call today is Andreas Schwer, our CEO, and David Bert, who looks after investor relations, is also on the call. We are going to briefly recap the announcement yesterday. So Andreas will talk a little bit about that, and then we will open it up to questions. If you have a question, please type it into the chat box. And once Andreas has recapped yesterday's announcement, David will help us go through the questions that arise. So with that, I will hand over to Andreas.
Yeah, thanks, Clive, for the introduction. My name is Andreas Schwer, CEO of Electro Optic Systems. Welcome to this call, ladies and gentlemen. Good morning, good evening. EOS has signed over the weekend a contract with a partner in Korea, which is a contract coming quite to our surprise. It was not planned for many, many months. We got an inquiry only a few months ago, and we started negotiations, which came to a positive end earlier than we've expected. So also that is happening in the defense industry. Usually, things take longer than expected, but sometimes you get positive, very positive experiences like this one. So that is an absolute positive showcase for EOS. It is the second worldwide laser export contract, which we have won for 100 kW laser weapons.
So far, nobody else has put a 100 kW laser weapon to an export client. So if you do some statistics, you can say 100% of the export market is EOS, which is a good starting point for us. And it makes us very proud because this time we have a client which is non-NATO, which is non-European. It is Korea. Korea is also a first-tier country, as the Netherlands are a first-tier country. A client which has a very strong industrial base, a client which has a very strong domestic defense industry. And we, as an Australian company, got the contract. I mean, that is saying something. The client has also here evaluated all the international options, and he's decided in favor of the EOS technology. All that is great. So let's talk a little bit about the contract.
We have signed this contract with an industrial partner, which is for us the big door opener for the Korean market. With this industrial partner, we will create a joint venture, a joint venture which we will consolidate, which we will control. That is important. So you will see then the numbers in order intake and in revenue, whatever we do in the future in Korea. And this partner will benefit from being with us in this joint venture, and we will provide a transfer of technology. We give a license for the production of this 100 kilowatt laser weapon technology to our joint venture in Korea. What does it mean? It means that it's obviously of highest importance for the clients to get access to the IP, to get access to a local production line.
Korea has grown its defense industry by those kinds of localization effects, and with the laser weapon technology, which EOS will bring to the table, they will do the next big step. That's exactly the kind of argument we are using also with respect to other localization attempts in our other negotiations with other potential countries. That is one key discriminator where EOS can offer something which others cannot offer, as we own all the IP and as we are in a position to transfer all those IPs. That makes the big, big difference. And also here, that was a key decision maker for the client in our favor. So the contract has a volume of $80 million, 8-0. It comes with this technology transfer.
It comes with a down payment of $18 million, and the rest, the remainder of the contract volume, will be secured by a letter of credit. In order to put this in place and in order to give the client a chance to visit and audit our brand new facility in Singapore, which, by the way, will have its formal opening during the Singapore Airshow in February next year. Once this is done, the contract will have fulfilled all the condition precedents, and we become effective. We expect that to happen before the end of January 2026. So very soon from today, given the fact that we have some weeks of Christmas vacation all around the world. So this contract is for EOS of particular importance, not only because it's Korea, it's also of importance because of the size of the local demand.
I was mentioning in some previous calls and investor meetings and publications that we are in negotiation with two countries for a larger quantity of laser weapons to be procured. And I was mentioning that Korea is one of them. So what does it mean? It means now that we are in a kind of pole position for the future large volume procurement program in Korea. And obviously, we expect whenever there is a tender coming up in the future to have a great chance of winning this. We do not expect such a tender to be 100 in one batch or in one piece in one contract. We expect those kinds of contracts to come also in smaller batches in sizes of 10, 20, 30, something like that units.
But given the fact that one laser weapon sells for a quite significant price, the volume of each of those contracts will be very significant. And all that justifies the localization of our technology and the buildup of a local supply chain. So that is, I think, the key essence of this contract. We will use this momentum now, obviously, to push also other contracts forward. We are in negotiation with a couple of clients, and most of those clients, obviously, will have a specific focus on local content. For those of you who have dialed in, not from Australia, but more from the European side, I'm pretty sure that you have noticed, for example, our activities in Germany, where we have offered to the German government also full localization of our laser weapon technology for a very attractive price.
And also here, we expect in the course of 2026 some kind of decisions. But Germany is not the only country which is highly interested in EOS laser technology. So this is the growth path, number one, for EOS over the next few years to come. This will build upon a steadily growing RWS market, which we said before we can probably triple by triple over the next three to five years just by the demand of counter-UAS cannon-based solutions. On top of that, we come with this laser weapon technology, the revenues out of laser technology. And we expect this to become the dominant sales and revenue generator within the next three to five years, by far the dominating one.
And then in the step afterwards, if we go to space warfare, we will employ this kind of laser technology, but not to shoot down drones, but to engage against satellites from ground. Also, that one is coming into play now much earlier than we have ever expected before. So this is, in a nutshell, the situation. I'm happy to answer any kind of question which you might have in mind. So please feel free to raise those ones, and David will moderate those questions for us. Thank you so far.
Thanks, Andreas. We have a few questions coming through. So the first question is from Paul. He asks, what is the production capacity of a Singapore facility? What will be the maximum capacity with the South Korean deal?
Yeah. So we always said in Singapore, we can produce between five or 10 systems per year. We can still further do that today with a facility size which we are preparing now. We can expand this facility to double the kind of throughput if needed. But again, we do not expect that we need to do that, as most of the clients, as also here in the case of South Korea, will insist on a local production. So we will use our joint venture in Singapore, sorry, our joint venture in Korea, to produce any future laser weapon for the Korean domestic market. So this first one for Korea is the only one which will be produced in Singapore.
So it's more about the question, how much can we, or how much kind of capacity we can set up in our new joint venture arrangements like this one here in Korea. And this depends then always on the size of the market. So if they would buy, for example, 100, we would have a production capacity of, I would assume, about 15-20 per year, something like that.
Great. I think you've answered the question, but will the JV have restricted geographical coverage?
We've agreed that the production license and the IP transfer will only be valid for the Korean market and case by case for certain export market. This depends on two factors. First of all, on the industrial link and network and lobby power of our industrial partner into certain areas or countries. Secondly, about the Korean government itself, if they have a government-to-government deal, obviously, we want to benefit from that. Also in those cases, we would then produce within the joint venture for this third country.
Are you able to talk any further about the payment terms on the contract?
Yeah, we have 30% upfront payment, and the remainder of the 70%, or the remainder of the value, which is 70%, is following quite a linear distribution over the timeline. And most of the revenue, or almost all revenue, will happen in 2026 and 2027.
Can you explain how EOS protects its IP once it has been transferred to the JV?
Yeah. We always apply the same kind of model. All those kinds of JVs have to be under control of EOS, so we can make sure that the respective key positions in engineering, development, and R&D are covered by experts which come from EOS. So we control the technology within those joint ventures, even if it's fully localized. That is the absolute key, and we do not sign any deal where this is not guaranteed, but that we can avoid any kind of unwanted dissemination of technology to third parties.
Could this JV be an option to enter into the Polish market?
Yes, obviously, it could be an option, as the Korean government has in place very significant defense deals with the Polish government. It could well be that also here we might be asked by one of those two governments to enter into this kind of arrangements and to produce weapon systems in this joint venture in Korea for the Polish market. That could happen.
Great. We've got lots of questions coming through. So are you able to share any news about future laser weapon developments, for example, greater than 100 kW?
Yes. As I was mentioning before, we are also in negotiation with one government, one country, to fully finance the development of a 300 kW laser weapon family. Those discussions are still ongoing. And if we get this signed in the course of 2026, we will be the only company worldwide outside the U.S. being able to produce then 300 kW laser weapons within the time horizon of, let's say, three to four years. That will give us a much more substantial, let's say, advantage over anybody else.
Are we able to provide any further details on who the joint venture partner is with?
As in most of the defense deals, obviously, the client or the partner does not want to be nominated. Sometimes, and I refer here to the Dutch contract, in the beginning, we were not allowed to mention that one, and then after some months, we got the permission to talk about it, so this could also happen here for the time being. They ask us to keep silence and to keep it confidential, and we respect that.
Are we able to talk any further about similar conversations with customers outside of Korea?
Yeah, we have quite a lot of discussions and negotiations ongoing, some of them with governments from the Middle East. Obviously, the Middle East is a very key market to us, and it's not only one country. We are talking here with three, four different countries. But we expect that the majority of sales long-term will be more in the European landscape, given the political, the geopolitical tension there, and hereby in discussions with a multitude of governments in Europe. And I mean, most notably, as you can read in the press, it's Germany and France, next to obviously the Dutch client, which is already in contact with us. But where we also expect some further steps to follow, also here, the Dutch government has announced to be extremely eager to give us more contracts and to enter into a strategic relationship.
We have already started those discussions with the Dutch government.
Great. Jonathan asks, can you provide a rough estimate for what the average sale price is in Australian dollars for one system? And can we provide any further details on what the accounting could look like for this transaction?
Yeah, I give the figure in U.S. dollars. Otherwise, people will be confused as we're always talking here in U.S. dollars. So if you buy a 100 kW laser weapon in low quantities, the typical sales price in U.S. dollars is between $45 million and $50 million. If you buy large quantities, and large means, I would say, 20 and above, the price goes down to $25 million- $30 million U.S. dollars. That is a kind of typical price range for a 100 kW laser weapon. But as we also see in this particular contract here, where we have signed not for $45 million- $50 million, but for $80 million, usually in such a contract, you sell more than just a kind of blank laser weapon.
In this case here, it comes along with the transfer of IP, the transfer of skills, technology, and the training locally of the people within the country, plus spare parts and many other things. So that's the reason why typically those contracts are reflecting a much higher dollar value than the net price of a recurring 100 kW laser weapon.
Just on the accounting for this, the question asked, David. So the sale of the high-energy laser weapon will be recorded the same as most of our normal sales are. So we would book revenue through that contract. We need to finalize the details of that between now and the contract becoming unconditional. There's not likely to be significant revenue in calendar 2025, but as Andreas said, we would look to book revenue in 2026 and 2027, with a little bit in 2028. In relation to the production joint venture, as Andreas said, this has been set up so that it's a joint venture controlled by EOS, which means it would be 100% consolidated, and EOS would record 100% of the revenue and 100% of the EBITDA, with a takeout at the bottom of the P&L for the 50% that EOS does not own.
So it's like 100% of all the intake and revenue, but 51% of EBITDA, not 100% of EBITDA.
Thank you.
Yeah.
One investor has asked, Can you remind us when the $18 million down payment is due to be received?
Yes, we expect this down payment to happen over the next few days or next few weeks, significantly ahead of end of January.
Have there been any attempts to enter into the Indian market?
Yes, India is one of the countries which has reached out to us and has shown a strong interest in our laser weapon technology, not only in the 100 kW domain. Here we talk about different tenders and different opportunities coming up, varying between 30 kW and 300 kW.
Rhys asks, can you talk a bit about how you were able to win this contract without having done a test for the customer?
The customer has seen our 36 kW laser weapon, as the Dutch government has seen this laser weapon, and they have been impressed by the quality of the product. We have explained them and showed them how we can scale this easily up to 100- or 150-kW. As this scale-up does not come with any technology risk, they were very confident that we can easily do that. That's the same reason why the Dutch have signed this contract.
Owen asks, will this contract be cash flow neutral, or will there be a working capital drag?
This contract is extremely.
Yeah, please, Clive.
Yeah, go on. This Andreas is about to say, this is a cash flow positive contract overall. It has no significant working capital drag during the project at all. There is an upfront deposit of $18 million that Andreas mentioned. So it will be neutral to positive from the outset.
Great. An investor notes the inclusion of the Slinger in the recent LAND 156 exercise and asks if our laser weapon could be included in a future in this project in the future.
Yes, the Australian government is very open in this LAND 156 program in terms of further expansion stages. In the beginning, you are right. The baseline LAND 156 configuration only comprises soft kill from an Australian-based company and our hard kill solution, the cannon-based Slinger solution, which is coming also from us from within Australia and some 70 mm rocket systems. That is the baseline effector suite. But yes, the government is ready to include further effectors. And obviously, we want to come into play not only with a laser weapon, but also with interceptor drones, which we have recently acquired. That's another potential.
Great. Peter notes the current construction time for a laser weapon is around two years and asks what EOS is doing to speed up this process.
I mean, it depends, obviously. As soon as we have a kind of standing production line with a kind of certain probability of inflow of new contracts, we can then also start long lead item procurement ahead of those contracts. And we will do that as we are doing it today also for Slinger and other RWS products. We have not started it yet because the market is just forming up for laser weapons. But yes, we can expect it to come in a few months from now. And as soon as we have, for example, a kind of order book of 10 or 20 laser weapons, you can assume that the lead time between order intake and delivery will go down to something like 15 or 18 months, but not much below.
Baxter asks, Do the 100 kW systems from the two development contracts need to be demonstrated before we see larger orders being signed?
No, they do not need to be demonstrated. In the case of Korea, yes, the Koreans first want to see that before they sign the next contract. But other clients do not insist on seeing anything before they place even a larger order.
Owen asks, is the deposit non-refundable?
Clive?
Yeah, the deposit is due by the end of January, and it is not a refundable deposit. There is, as you've seen in the announcement, there are some refund clauses relating to performance of the product overall, but not in relation to the deposit specifically. So we're not in a situation where we expect to receive a deposit and then have something change and repay it two months later. So I hope that answers that question, Owen.
There's a question from an investor, Sean, asking if we can just remind the audience on what exactly EOS produces in the laser weapon system, which elements.
Yeah. We are the only company which has a fully vertically integrated production or value chain. We start with our own production line. I start from bottom to top with a laser source. So we are purchasing the fibers, and we are producing the laser source by ourselves. We purchase some commercial off-the-shelf laser amplifiers, which we disassemble, we ruggedize, we militarize, and make it a specific product. And we do the entire beam forming, the beam head and the beam director, the entire tracking and software system, everything by ourselves. So the only major component we are buying is the laser amplifier. But again, even that one we completely upgrade. So nobody else has this kind of in-house spectrum of activities. And that makes us extremely independent.
As we own all the IPs, we can easily transfer those into other countries, which you couldn't do that easily if you only would have a very limited scope of value add in this overall value chain.
I think that answers most of the questions. So perhaps, Andreas, would you like to wrap up?
Okay. Thanks, David, so I just want to summarize that, obviously, this kind of contract came to the surprise of many investors, and we hope that we have some more surprises in our upcoming books pretty soon. The market is extremely bullish. We believe that we will become the world market leader in high-energy laser weapons. This market is extremely growing. It is the best option to defeat drones, and it's the only option to defeat drone swarms, and it is almost the only option to defeat drone swarms even at commercial and civil installations such as airports. That makes it extremely versatile, and the market demand will grow in a way that we hopefully will soon reach a point where we have problems to serve all the shortcomings and all the needs. That keeps us extremely optimistic.
We will expand our capacity as needed in order to serve most of that, and we are very confident to make this, again, a very stable, growing, and profitable business line of EOS. Thank you very much for your interest in EOS and for interest in this particular deal.
All right. We'll close the call there. Thank you and bye-bye.