Participants, be advised that this webinar is being recorded. Welcome to FBR Limited's CEO Update webinar. We are joined by FBR's CEO and founder, Mark Pivac. The structure of this webinar session will involve a presentation given by FBR, and will be followed by a question-and-answer session. Participants will remain muted throughout the webinar and will have the opportunity to submit questions via the chat function. On that note, I will now hand over to Mark Pivac. Mark, over to you.
Good morning, everyone. I'm Mark Pivac, CEO at FBR. FBR has a lot of opportunity ahead of it, and whilst we've recently been through some turbulent and tough times, I really want to stress that the team we have is really passionate and the tech we have is so good, the market's so big that I really do think that FBR has what it takes to succeed. I'll run through a few things related to our March quarterly and the recent restructure. I also want to look to the future because I'm sure that's what really interests us. Right now, I think it's important that I focus on and deliver some stability to FBR, continuity, and articulate a clear strategy to deliver on our targets, and drive efficiency in our business and the construction industry, and reduce costs while maintaining capability.
I think it almost goes without saying that we need to preserve our core asset, which is IP, and we're also at a point where we need to start generating revenue. FBR's got unique robotic technology and DST to accurately place an object through beams outdoors. Cole Shivers, the CEO, and myself remain committed to driving early revenue, targeting multiple market entry strategies, and finding opportunities globally. We've retained capability to ensure this is achievable. SHI, or Samsung Heavy Industries, presents a big opportunity. To truly understand the scale of shipbuilding in Korea, you have to visit it. I have. It's massive. From day one, we've talked about opportunities for DST, and this really is a good one that's very likely to happen. The USA is a big opportunity as well.
Sure, they've got some political and economic issues right now, but the data I'm seeing suggests the residential housing market is still huge, with plenty of scope for Hadrian robots to service it. One potential partner in CRH decided to not proceed with a fairly complex JV option, but that doesn't mean there isn't a market there and an incredible opportunity for Hadrian and Wall as a Service. We're currently looking at multiple projects with smaller and large builders, developers, and material suppliers. I'm convinced that Wall as a Service can be profitable. H3 is still in the USA because we think there's real opportunity for it and many more Hadrian robots there. H4 has been commissioned, and we plan to have it delivering commercial Wall as a Service projects in the second half of 2025. We're already in discussions with potential customers building a pipeline of commercial work for H4.
Now, as outlined in the quarterly, we've dramatically reduced costs as part of a rationalisation program to focus on revenue opportunities. We've taken an immediate hit with some one-off costs associated with the restructure, but long-term, we've reduced our cash burn to around $10 million-$12 million per year. Whilst we've dramatically reduced our costs, it was something we had to do given that we'd scaled up to meet some of the demanding delivery terms of the JV, and we no longer have to do those things, and we can't really justify those big costs without a revenue stream to back it.
We have, however, maintained our core capability to operate Hadrians, commission Hadrians, manufacture and support both spare parts and complex machines, develop technology, and complete the SHI development if and when it happens, as well as maintaining our relationship with LEBA as a potential manufacturing partner in the future. Now, FBR is all about bringing automation efficiency to industries that are still really manual. Our robotic DST solution enables big long beams to work accurately. This is a game changer for the construction industry. We have a really talented robotics team with a wide range of engineers ranging from mechanical to mechatronic, the programming and control systems, and many other skills. FBR also has a skilled and well-equipped workshop. Whilst we have a lot fewer employees than we did a month ago, we've maintained our core production assets and our skills.
We actually have an amazing production capability for rapid prototyping and low-rate production of complex systems. In-house, we have trades and CNC machinery for fabrication, machining, painting, electrical, and assembly. This workforce and equipment allows FBR to reduce inventory, produce parts on demand, and dramatically reduce lead time during development and also production. Our Hadrian robots have now built over 40 dwellings globally. Our technology has been road tested and is ready for commercial use. The time of demonstration is over, and it is time for us to get productive and profitable. This will not happen overnight because building is a complex process and everything has lead times, but we are building pipelines of work and we will be launching wall as a service. The revenue reported in our four C's is not proper wall as a service revenue.
It's mostly earned from option fees, sale of a house that Hadrian built the walls of, and some demonstration wall as a service. For all practical purposes, FBR is pre-revenue, but I aim to change that. Our burns have been reduced from over $34 million per annum to about $10-$12 million per annum. We intend to start generating revenue and shifting FBR to become cash flow positive. I can't give any guidance on that as it's still early days, and I only became CEO about two weeks ago. I'm the founder of FBR and the inventor of DST. I believe in our technology and what it's capable of. What I can say is that previously our strategy was very focused on growth and technology development and proof of concept. FBR was aiming to partner with very big organisations and rapidly go from zero to hero.
This has not worked out as planned, but I firmly believe that we can generate revenue and show both wall as a service and other DST-related opportunities as profitable. Once we prove out those MVP or minimum viable product businesses, we will have in place the foundations for growth based on proven economics. Our strategy is now very much focused on generating revenue and leveraging the assets we have, both physical and intellectual, and also leveraging our technical capability. To do this, we are building a pipeline of work. This will take time, but will also be worthwhile. Cole and I are working on multiple market entry opportunities and putting actions in place to make it happen. As I mentioned before, H3 is in the USA. It is currently stored at the CRH facility in Fort Myers, where we were based during the option period. We have that facility on a month-by-month basis.
CRH have been quite helpful, and I thank them for that. H3 is in the USA on a temporary permit because it's on an Australian spec truck. We have applied for an extension with the EPA and National Highway Transport Safety Administration for it to be able to stay in the USA a bit longer. Now, back in Australia, H4 is practically complete and is being commissioned. We do intend to do some upgrades to it based on things we learned in the USA, and we expect to have H4 out earning its keep in the second half of this year. Please bear in mind, we do have a smaller team than we did before. H1 and H2 have been used for technology development, including a very important demonstration for Samsung Heavy Industries. I hope to be able to share some of those developments with you soon.
Right now, we're looking at how we put H1 and H2 to work in the local Australian market. It's not completely straightforward because they're not as fast or productive as H3 and will depend on large block and some upgrades to make them really commercially profitable. We are assessing the cost-benefit of that as an option, and I'll report on that as we get some answers. While H1 and H2 have together built over 30 demonstration structures in WA, it was really to showcase the technology rather than to prove out commercial viability. Our next step is to make money with them. We've maintained the ability to operate a Hadrian, manufacture and commission a Hadrian, and carry out work for external parties such as SHI. We have reduced the executive team down as far as we could realistically go. We're relying on external providers for some services.
I'm now the CEO and also look after what I used to do as CTO. Cole's the COO and wears every other hat that needs to be worn. Together, we continue to drive multiple market entry strategies and opportunities globally. FBR's core asset is its IP, and we have over 400 IP rights across 41 patent families with protection in many countries around the world. We do intend to add to this IP portfolio. As part of our cost reduction, we've consolidated three premises in Western Australia down to one at 88 Sultana Road. That has a good amount of room here with 10,000 square metres of factory space and similar outdoor area. We'll be giving a factory tour on the 13th of May to interested parties who can submit an expression of interest to tour our factory. If you're interested, please send an email to FBR.
This will be by invite only and will require an NDA and visitor induction. Now, our aim is to put H3 to work in the USA and H4 to work in Australia. We're, of course, monitoring the evolving economic situations, and we may change plans to suit. H5 is about half built with nearly all of the expensive parts purchased. We don't have the funding or staff to rapidly progress H5, but we will work on it as we can. Realistically, it could be ready in mid-2026. We're continually discussing matters with Samsung Heavy Industries and expect a purchase order for the first part of the work in the next few weeks. As adjustments applications are developed, we do expect to file for additional IP rights. Now, I just want to reiterate a little on demonstrating the commercial viability of Wall as a Service.
We have a Business Development in full time in the USA. He's targeting launch customers with the aim of developing a pipeline of work big enough to justify the high cost of deploying a team to the USA to train a local team to make it commercially viable. It's a little difficult at the moment due to quite a bit of economic uncertainty during the tariffs and deportations, but we hope that will settle down soon. FBR is talking with a good range of builders, developers, and suppliers from very small who can move quickly to large who can offer a lot of work but typically take a while to make decisions. We're dealing with the complication of building a pipeline of work while we're not yet in a position to do it unless the pipeline of work exists.
It's a bit of a catch-22, but we think we'll work through it. We've received a number of expressions of interest from builders to potentially use the Hadrian X. We don't have anyone working full-time on BD in Australia. That's being handled by Cole and I for the moment. We have some really good leads for work in the second half of this year, and we aim to crystallize them. These leads are in the residential and commercial sectors. As with many things in the building industry, there can be quite big time gaps between bidding for work and getting it, and this is especially true at the start. It's a bridge we've got to cross. Now, I've already mentioned our restructuring. Shannon Robinson has taken on the role of Chairperson and has been a big help to me during my transition to the CEO role.
She's based in Western Australia. She's been on the board this time around for over a year, and she was previously on the board when FBR listed, and she was instrumental in that process. Richard Grellman remains on the board, and I thank him for his never-ending encouragement, help, and wisdom. As mentioned in the quarterly, Reece Walden is appointed as Company Secretary, and I look forward to working with him. I also thank Aidan for his help on the FBR journey as CFO before Roe and Karen and then as Company Secretary. Now, I intend to communicate as often as openly as I practically can. I'm sure you all appreciate the ongoing ASX disclosure obligations and materiality thresholds that I'm subject to. I won't always be able to say as much as I would like to, but I will say as much as I can.
Now, please keep an eye out for vlogs, webinars, and non-deal road shows and conference attendances. We've also signed up on Investor Hub, which is an online communications platform used by many ASX companies. We're onboarding that now and expect it to go live shortly. Please look out for it and please engage with it and register to be part of the FBR family. It includes a way to ask questions and will help us with announcements, videos, and information. I'll be attending Sydney Build next week right after the EGM on the 7th and 8th of May, and then Australian Manufacturing Week in Melbourne on Friday, the 9th of May next week. I'll be catching up with some investors as well while I'm doing that. As I mentioned, we'll have a tour of FBR's facility in Perth in mid-May.
We'll also be doing a road show in mid to late May, and I look forward to meeting some of you. Our immediate objectives are to win work, reduce capital funding requirements, although we do have some gaps to fill, and clarify the business and engage with investors to meet our ongoing funding requirements. We have some other longer-term revenue objectives, which include licensing our IP suite and realising some adjacent applications such as shipbuilding, automation, roofing installation, solar farm installation, large-scale welding, and refractory brick lining for the steel industry. These are all applications that use DST and long booms and, similar to the brick laying application, automate dull, dirty, and dangerous tasks that are currently very manual.
These are all big applications with big players, so we don't know the timing of any deals that may happen, but of course, I'll keep you informed as and when I can. Now we'll go over to some questions. Back to you, Andrew and Cole.
Thanks, Mark. Obviously, it sounds like there's a lot going on in the business at the moment. In moving on to the Q&A session, I'll just remind participants that you're able to submit questions via the, excuse me, Zoom chat function. We've had a fair few come through already. Mark, we'll probably go with the one that's on many people's minds. The recent demo program with CRH was obviously very successful, completing nine homes and completing a single home in a day. Would you be able to give some insight as to why CRH didn't exercise the option?
Yeah, look, as Andrew said, that demo program went really well. We demoed building a house in a day with just three people, which was one of the major targets of that. One of the things in all the commercial agreements we enter into, there's confidentiality obligations, and they survive the end of the commercial relationship even if things don't proceed. We have to be mindful of that. Having said that, the demonstration program was highly successful, and we got introduced to a lot of different companies over there: builders, shell providers, general contractors, people interested in the financial markets, investors, all sorts of people. During the actual demonstration period, we were subject to an exclusivity clause, so we couldn't actually do any deals. Obviously, it wasn't possible to take any orders because the JV didn't exist at all.
Look, while we were doing that, we also did a lot of commercial modelling and all the information that we took into account there sort of indicates that we could build a commercially attractive business hitting those metrics. As for why CRH did not proceed, that is something that they decided not to do. They are a big company. They have their own internal reasons. Some things we just cannot get a clear answer to. Now, all the information that you might need to model wall as a service in the US is available in the public domain, and you could probably put your own financial models together. That shows that if you can build a house with three people in a market in the US, you should be able to make money. I will also point out that H3 is in a CRH facility right now.
We have clearly got an ongoing relationship, but other than saying that our machines are stored in their facility, I can't really expand any more on that.
Sure. Thanks for that. We'll go to a live question, actually. If you give me one second. This one's from Damon Atkins. Why can't the Hadrian be built on a trailer instead of a truck?
Yeah, look, it probably could. We have looked at that. There are some things which have to be provided, such as power and hydraulic power. When it's on a truck, you get that sort of almost for free because the truck's got an engine that you can generate hydraulic power from and hook up a generator to the PTO. You've also got a nice air-conditioned cab for the operators. Look, it's a really good point, and we have done that.
We've sketched out and done some preliminary models of how Hadrian could work on a trailer. You've got to bear in mind that for the size buildings that we're looking at, you need a 30-metre boom or 100-odd- feet boom, which makes the trailer reasonably big. You'd be looking at a semi-trailer type arrangement. It is possible. There's the possibility that that may happen in the future, but it's not something we've got in our product range at the moment.
Thanks for that. That's pretty insightful there. Thanks for that question. Please keep them coming through. We'll move over to some of the ones that were emailed through. We'll go to—you mentioned you have some strategic advisors. That was obviously prior to you becoming CEO. The question is, what is happening with the advisors you've appointed to assess FBR strategic options?
Who are they, and what are they doing?
Yeah, right. Look, we've got advisors in a number of different areas, but I'm guessing this question relates more to the ones mentioned in the corporate update that we put out to the market on 27th of March. Those advisors are in place to generate corporate opportunities and assess inbound inquiries across M&A, IP monetization, capital structures, divestment opportunities, and that sort of thing. As is typical for those agreements, they've got confidentiality clauses, and under the agreement, I'm not able to disclose the name of the advisors. They've got a broad remit, and given the nature of the subject matter they're in place for, we won't be putting in a timeline on it, but rather assessing each opportunity on its merits and the value that it could create for shareholders.
Great. Thanks for that one. Moving to the next one.
How many Hadrians would Labor need to start mass manufacturing? Have you considered speaking to other manufacturers?
Yeah, look, we've considered a range of manufacturers, and as you know, we're building and have the ability to build Hadrians here in Perth. We've always maintained that we need to produce at least the first few Hadrians, and practically, if it's only a few a year, then we'll keep doing that. We've got H3 in the US. H4 is in commissioning, and H5 is in manufacture. We've got plans for subsequent Hadrians and the upgrades that will be incorporated on those, but we're not currently funded to accelerate the completion of any of those. OEMs are looking for bigger numbers. Exactly what that means, we don't know. Probably at least 30-100 machines a year. OEMs would love to be building 1,000 machines.
Some of the production lines, which I've viewed, build 50 machines a day. We are a long way short of that. As we commercialise Hadrian and prove out the minimum viable product, wall as a service, and prove that it's actually commercially viable and start to get some customers, then we'll assess that as and when it needs to be assessed. Labour is there, and they're keen to help us, but it does need to be at a scale that's sensible for them and also a scale that's sensible for us.
Great. Yeah, that was really insightful, actually, and obviously fairly exciting as things kick up there. Sort of moving over to still on DST, but perhaps the exciting alternative use cases for it.
We're in negotiations with SHI up to, and you obviously covered a bit of that in the presentation, but who else are you in negotiations with?
Yeah, look, when we start commercial negotiations, probably the first thing that happens is the confidentiality agreement, which usually—well, we always have to set up specific carve-outs for us as an ASX-listed company, and that does make things a little trickier than they otherwise would be. Usually, we're dealing with organizations that have got a different materiality threshold to us, especially given that we have been engaging with some of the largest companies in the world. Those carve-outs only go live upon the achievement of certain milestones, and then we would have to release an announcement to the ASX informing everyone of the progress.
I can't give any specifics on other parties at the moment, and if and when I do, it'll be via an ASX announcement. We can't give a live commentary about ongoing commercial negotiations, but we'll update the market when there's something to report. We have advised that we're looking at a shipbuilding application with Samsung Heavy Industries, and we've also advised that we're looking into concept designs for a number of other industries, as I mentioned during the webinar. Most of those are with parties that are already in those industries or supply to those industries. Some of them are sort of more general, where we've got perhaps a launch customer for one particular industry, but there'd be many more. For example, large-scale welding is not a problem for one customer.
There's hundreds, thousands, tens of thousands of big fabrication firms around the world which build mining equipment, ships, industrial plants, all sorts of things which are bigger than what you can reach with a standard industrial robot. Our technology's got a lot of advantages over the alternatives, things like cobots or lots of manual welders or robots mounted on big gantries. The whole boom system with dynamic stabilisation offers a lot of advantages in those kind of applications where you're looking for automation at a big scale, be it inside or outside.
Excellent. Thanks for that. I guess moving back to the actual Hadrian X questions come through, why are you not solely focused on introducing the Hadrian X to the market in its current state? Why are you iterating, and why are you looking at other applications?
Yeah, look, the big iterations of Hadrian X are pretty much done. What we're doing now is continuous improvement, where we're going out in the market, we're finding issues and potential improvements and making it better. We need to have a machine which is reliable and easy to operate. During the demonstration program, we've been doing a lot of development work. It's a complex machine, and it does an amazing job. It would be unrealistic to expect that the first time you put it out, that it's a perfect machine. It wasn't, but it's pretty good now. I can tell you that right now. Now is the time for us to really start concentrating on introducing Hadrian X to that commercial market. Up till now, what we've been doing is demonstration work.
As far as I'm concerned, that demonstration work is done, and it's time to get commercial with it and establish wall as a service in a small way because that's all we're funded to do. Establishing that will overcome a lot of potential resistance to taking on new technology. It's one thing to actually show that your tech works. It's another thing to get out there and make a dollar with it. I think we're at the point now where we're about to do that. All right. I guess the question also asked about other applications. Look, right from the very start of FBR and its listing, investors and myself, the whole company has been interested in what else can we do with this technology. Brick and block laying is just—it's an obvious thing. It's a repetitive task. It's dull, dirty, and dangerous.
It's been out there for thousands of years. There's plenty of other tasks like that as well. Some of those we've been looking at, and some of them we've been approached by other organizations. That's why we're looking at them. It's not anything new. We've been doing that for the best part of 10 years.
Great. I actually remember listing the business with you guys back in 2015 and joining more recently, seeing the Hadrian go from a CGI image to a number of trucks is fantastic to see. Moving over to another question that's come through. Why did Mike vacate the CEO position at such a critical time?
Yeah, look, Mike had recently turned 60, and he was in the position where he knew we'd be reducing our team size fairly significantly.
Mike made the decision to step out of the business with me stepping into the CEO role. I've been by his side for the last 10 years. I'm still in regular contact with Mike. He's happy to assist us with anything we need. As much as anything, it's about having to make the team smaller. And I've learned a lot over the last 10 years. I definitely wasn't ready to be CEO of an ASX company back when we first listed, but I am now. I'm really looking forward to it.
That's great. Moving over to another question from a shareholder, this one from Stephen.
As you roll out wall as a service to generate revenue using H3 and H4, will you still be open to working with larger groups who can fund mass manufacturing with FBR, taking a smaller or lesser role in the operation of wall as a service?
Yeah, absolutely. Absolutely.
Is this something that the strategic advisors would be looking at?
Yeah, absolutely. One of the challenges with new technology, as I've said before, is it'd be nice to go from zero to hero, but the reality is that big organizations have a lot of different approval processes, and they quite often want to acquire a business that's really a going concern and not something that they're going to have to invest in technology and build and develop. I think us establishing wall as a service on a small scale will show that it can be commercially viable.
From there, that reduces our dependency on third parties or a big deal because we've got that possibility of if and when it becomes profitable, we'll be able to fund it and grow it. Of course, we're open to big partnerships, and I think that'll make it actually easier for a big partner to come on board if they can look at financial statements and see, "Oh, well, this thing costs so much to operate, and it made so much that year, and we've actually got some financials that we can look at and project out based on the size of the markets and so on." I think it's a critical thing, and I'm really looking forward to it, and I think it'll open up a lot of opportunities, which up until now have been quite difficult.
Look, I'm amazed that we got as far as we did without a business that was profitable. I'm really looking forward to establishing Wall as a Service as a properly commercial thing with the double-headed aim of making it profitable but also attracting partnership and potentially franchise models around the world or even machine sales. If somebody's going to or an organization's going to operate a Hadrian in part of the world where it might be difficult to operate, it could be a war zone, or it could be in a second or third world country which has got difficult political climate or something, a sale into those sort of markets will be much easier if we've proven that it's commercially viable.
Thanks for that. That's certainly very interesting, particularly with the varying models that might work in direct sales or operating Wall as a Service profitably.
I think that's all we've got time for at the moment, but do you want to give some closing remarks?
Yeah, look, I'm really looking forward to meeting some of you in the future and engaging a bit more with webinars and so on. I think once we get Investor Hub up and running, that'll make it a bit easier for us to do webinars and so on. If you've got questions, and I don't know if there are any unanswered ones, Andrew, but we'll get to them eventually. Yeah, keep in touch, and I'm really looking forward to moving FBR forwards.
Yeah, that's great, Mark. Yeah, there were some questions that weren't answered. Unfortunately, some of them are questions that involve providing guidance that we're unable to do.
Unfortunately, we did get those questions, and thank you guys for engaging, and thank you all for the questions that are coming through. As a bit of a reminder, this webinar will be uploaded to the company website, and a copy of today's presentation is available on the ASX platform. Thank you all for attending, and look forward to the next one. You may all be without disconnect. Thank you.
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