Must advise that this presentation is being recorded today, Friday, the 28th of November, 2025. I'd now like to hand over to Rakon's Investment Relations Manager, Nick Laurent. Thank you, and please go ahead.
Kia ora and good morning. Welcome to Rakon's half-year 2026 financial results and business update, presenting today are Rakon's Chief Executive, Sinan Altug, and Chief Financial Officer, Mark Dunwoodie. There will be an opportunity to ask questions after the presentations. In a moment, I will hand over to Sinan and Mark to present the update, but first a short reminder that during this presentation, we will make forward-looking statements about Rakon Ltd and the environment in which the company operates. Because these statements are forward-looking, Rakon Ltd's actual results could differ materially. I encourage you to read the disclaimer slide and the important notice slide of the presentation for more detail. Lastly, we ask that anyone recording today's webcast does so for note-taking purposes only and not for publication or broadcast of the webcast content. I will now hand over to Rakon Chief Executive, Sinan Altug.
Good morning, everyone. The first half of financial year 2026 marks a clear return to growth for Rakon. Revenue grew 30%, gross margin lifted 11 percentage points, and our underlying EBITDA increased 149%. Every one of our core segments delivered substantial growth this half. Across the portfolio, we saw strong contributions. Aerospace and Defence delivered its fifth consecutive growth period with a record NZD 75 million order backlog. Telecommunications rebounded strongly as orders normalized. AI and Data Centres business grew by 50% and is tracking to make a significant contribution to this fiscal year. Positioning delivered a steady 14% growth, supported by demand in high-precision systems and some exciting new applications. We held OpEx flat while substantially scaling production, and we are entering the second half with strong momentum. Importantly, our full-year underlying EBITDA guidance of NZD 15 million-NZD 24 million remains unchanged.
Our first half results clearly show the benefits of stronger demand across all our major markets and the structural improvements we have made to the business in line with our strategy. The double-digit margin uplift reflects stronger volumes, a richer product mix, and the early benefits of scaling production in India. We continue to keep operating expenses tightly controlled while still investing to scale our strategy globally, and that discipline is flowing directly through to our earnings. Underlying EBITDA strengthened significantly, reflecting improved operating leverage across the business, and NPAT also improved materially year-on-year, substantially narrowing the net loss after tax. Mark will take you through the financials, including segment details shortly. We are executing our FY2026 to FY2028 roadmap with pace and clarity. Our growth is primarily coming from three engines: Aerospace and Defence, AI and Data Centres, and Next-Generation Telecom, each supported by strong structural demand.
These are all growth markets where we have strong technology differentiation and operational competitive advantages. Across the roadmap, we are building the foundations for growth, strengthening customer programs, advancing our technology platforms, and aligning the organization around the growth engines that will carry us through the coming three to five years. This three-year horizon on the slide is about scale: scale in volume, scale in technology, scale in customer reach. The progress in the first half gives us confidence that we are on the right trajectory. Turning now to our FY2026 milestones, this is where you can see our execution shining through. In Aerospace and Defence, the France cleanroom expansion is complete, positioning us to deliver our record multi-year $75 million backlog. This is Rakon's highest ever.
Demand remains strong across low Earth orbit space constellations and defence programs, and capacity expansion across France, India, and New Zealand supports the growing multi-year pipeline. In AI and Data Centres, tier-one design wins and order conversions are progressing well. We delivered 50% growth in the first half, and we expect meaningful revenue in the second half as programs scale. Telecom also delivered strongly with a 49% rebound as orders normalized and our design win positions held firm. The segment is returning to a more predictable growth trajectory. Operationally, we advanced our global manufacturing footprint, including major progress on product transfers that underpin our long-term margin profile. We also got approved under India government's landmark technology manufacturing initiative, ECMS, that comes with financial initiatives of a minimum of NZD 3.5 million. Importantly, it reinforces our position as a strategically important tech manufacturer within the Indian ecosystem.
Together, these milestones give us confidence and a line of sight into delivering our FY2026 plan and in building the platform for our next phase of growth. India is now a fully operational high-volume node in our global footprint, and we are already seeing the impact. We completed the Mercury + transfer from New Zealand to India and reached full volume production in October and will be delivering around $2 million of margin uplift from the first 25% of the transferred volume. We expect to reach around 70%-80% transfer over the next three quarters, which will unlock further structural margin expansion. This actually frees New Zealand to focus on innovation and introducing new high-value products while India scales volume and France continues to expand our Aerospace and Defence business.
This global model with New Zealand as the innovation hub, India as the scale engine, and France as the Aerospace and Defence Centre gives us the leverage we need for the next phase of growth. Mark will now take you through the financial performance and the segment details.
Good morning, everybody. As Sinan's outlined, compared to the first half last year, we've had a cracking result first half this year. Last year, we talked about Rakon being an America's Cup yacht, and we were keen to get up on the foils and that we needed weather conditions to change. To reuse the analogy, the boat's up on the foils now, and we're accelerating. Volumes have increased, margins have improved, and we're carefully navigating cost containment against growth investment. Revenue grew to NZD 54.2 million, up 30% year-on-year. Gross profit increased to NZD 26.5 million, an 11 percentage point growth year-on-year as well. At the same time, we're very carefully holding OpEx flat and being very selective as to where we invest it. Our underlying EBITDA has improved to NZD 3.6 million, and we've narrowed our NPAT loss down significantly, expecting to turn it in the second half of the year.
Inventory's grown as we scale up for production, and we're in a really interesting space at the moment with two major ramp-ups going off in parallel, one in new space and the other in AI hardware at the same time as our traditional businesses rebound. It is a very challenging, pretty thrilling environment. These results reflect the benefits, as Sinan mentioned, of our global reorganization, our product transfers, with our margin improvements clearly showing, and we're expecting further gains as we continue to scale. Aerospace and defence reached $20.1 million, which is 20% up year-on-year, and it is now 37% of gross revenue. This is the fifth consecutive half-year of growth. As Sinan mentioned, we've got an order book that's a record for us in the background. Our multi-year pipeline continues to expand, and it is only limited by our facilities and our capacity for expansion, which we're addressing.
We're seeing high customer order growth in subsystems for low Earth orbit satellites and ground-based radar applications. Telecom revenues rebounded to $25 million, which is up 49% year-on-year and is now 46% of group revenue. There's been a stellar improvement in gross margin, up to 42%, which is 27% now above year-on-year. We're maintaining market share and a high design win rate with strong demand from our tier-one AI and Data Centre infrastructure players. We expect to report significant AI and Data Centre revenue as a separate segment in FY2026, reflecting momentum in this space. Positioning, where we really is a flat market for us, has actually impressively leapt up a little bit. We continue to see market share in high-margin, precise positioning applications, but at the same time, we're seeing new opportunities in autonomous unmanned undersea vehicles, which is an exciting area that we're looking at.
Thank you for listening. I'm happy to take questions at the end. Back to you, Sinan.
Thanks, Mark. Looking ahead, we entered the second half with strong momentum, and our full-year underlying EBITDA guidance of $15 million-$24 million remains unchanged. Its earnings are expected to skew toward the second half due to seasonality and program delivery timing. Aerospace and Defence will continue to be a major growth driver as we deliver against the multi-year backlog and scale capacity in France, India, and New Zealand. Telecommunications rebounded strongly, as I mentioned, and is positioned for further growth with continued 5G densification and fixed wireless access uptake. AI and Data Centres will contribute meaningful revenue this year, as Mark said, as tier-one orders convert, and this is quickly becoming a core segment for us. Positioning remains stable, and we are seeing emerging opportunities in autonomous, uncrewed, and undersea systems. Overall, FY2026 is our springboard year, and we are well positioned to accelerate into the second half.
To summarize, we delivered a strong first half with growth across all segments, expanding margins, and have a clear momentum heading into the second half. Demand remains strong, and our capacity is expanding. Our market segment operating model is working well with clear execution momentum across both the Aerospace and Defence and commercial businesses. The Aerospace and Defence business is scaling to meet record global demand, and the commercial business is driving growth across Telecom, AI, and Data Centres and positioning while lifting margins through greater volume and efficiency and manufacturing optimization through product transfers. All of this positions us very well for the remainder of FY2026 and our next phase of growth. Thank you. I'll now hand back to Nick for Q&A.
Thank you, Sinan. We'll now start the Q&A portion of the presentation. Just a reminder that if you'd like to ask a question related to the full-year results and presentation, please submit your question in the Q&A box on your screen. We'll try to answer two or three questions from each person first, depending on how many you ask, before rotating around and asking some of the remaining questions before coming back to anything outstanding if we have time. Just a reminder, if we don't get to any questions on this call, you can email us at investors@rakon.com. Just to start us off, we have some questions in here from James Lindsay at Forsyth Barr. The first question he's asking is, can you talk about how the LEO/MEO space market is developing and where the constellations you are working with are in the development?
Yes, the short answer is yes. We have mentioned in the past few years that there is a lot of potential in the LEO/MEO market. There are multiple constellations actually we are working with. I want to maybe attract attention to a recent one that we have won as the next phase of a mega constellation that is for direct-to-device communication satellite constellation. Yes, that is going as planned and with momentum, with the inertia that we have built, that we continue to build with also newer products. Some may have seen some product releases from us that go into both traditional space applications as well as low Earth orbit commercial space applications.
Great, thank you. I just have a couple of related AI questions here from James as well. The first one is, how do we think about AI as a component of Telco at the moment? Can you give us any indication on size?
Yes. From our side, we will, as Mark said, we are intending to separate it out as a core segment with our full-year results. At the moment, the reason that it is within the Telecom segment is the fact that some of the customers and some, let me say in short, some convergence and some customer interest and momentum being built with the Telecom infrastructure guys as well. We have kept it within the Telecom segment, but we will separate it. I would prefer for exact numbers because we have not really reported it as a separate segment. I prefer to give those, cite those exact numbers at the end of the fiscal year.
Thank you. The related question was, how will scaling in AI really scale? How is the relationship with your large global customer in the segment going? Two questions here. How will it scale, and how is the relationship with the large global customer going?
Right. I mean, I need to act as if I do not know what he is referring to as our large global customer. We have several large global customers. The scaling of it, actually, that business is quite substantial from our side. We mentioned this last year. We started investing into it, and we continue to invest into it for the first half. We will continue to invest into it in the second half. The ramp-up we expect is quite steep. We need to ensure that we are in a position to absorb and generate revenue commensurate with that ramp-up of several large customers. Having said that, as I mentioned, we do have meaningful business at the moment from AI already. I am referring to further major ramp-ups over and above what we have in place.
Great, thank you. James, I'll come back to the rest of your questions soon. Just moving now to some questions from Tony Morgan. Our first question from Tony is regarding R&D. He says, is Rakon's R&D constrained within the current capital structure? I.e., would it be preferable to spend more on R&D to keep up with any competitors?
Yeah, there's sort of two questions there. The first one is, I don't think we feel in any way constrained, and we're lifting our spend on R&D every year. I don't think we're constrained by a capital structure at all. I mean, more capital and a larger business, you might spend more on R&D, but ours is the right fit for what we're doing, and we're not in any way holding back. I feel it's appropriate.
I just want to add to that, to the flip side, that is that some of our competitors have 10x the spending because of their financial ability. They have substantially higher spending on R&D, not only R&D, on all aspects of the business. From our side, we are balancing in a way to ensure that we continue to invest heavily on R&D because our long-term and our long-term strategy and our long-term value creation does hinge upon us remaining as a technology leader. We will continue on that path moving forward. The more, the merrier, in short, I could say, Tony. The more, the merrier.
Agreed.
Okay, and a couple of, well, several technology questions from Tony here. I'll try to bring them down into just a couple of questions. The first one he's asked is around a technology opportunity that's been discussed in the market, which is the partnership between Nokia and NVIDIA for AI- RAN. What does that mean for Rakon in terms of opportunities?
Right. Without going into the specifics of that particular announcement and those two companies, that is the type of convergence that I was referring to a moment ago when I talked about convergence in Telecom and AI and Data Centres as well. Suffice it to say that we are intending to be a major player in those convergences because of the fact that our product portfolio, as we have had our roadmap, is very well suited for this future, which we have been expecting for a number of years. That convergence that is only being announced now has been on our crosshairs for a number of years, and we have been evolving our product roadmap accordingly. In short, yes, those are developments that are going to very positively impact our path forward.
Thank you. Tony, just as a second technology question, he is really looking for a bit more color around our technology pipeline, specifically asking about products for AI and also the new Ultra Stable Oscillator that we recently released.
Yes. I think, again, as I said, our product roadmap is one that continues to evolve for not today, not tomorrow, but several years ahead. That's how, as Tony, I think, knows well, that's how we actually maintain our technology leadership. For AI, we have quite a lot of products that are new and that have evolved from our existing products that are on our future roadmap. I'll leave it there. I'm not going to give more technical and performance details. For the space oscillator that Tony asked about that we had a release on, that's a really exciting product because that is actually a quartz-based oscillator that is a reference that is at par with Atomic Clocks. It is our way of creating alternatives to much more expensive atomic clocks with quartz-based technologies. I would say that that product is the first in the world.
That's exciting for us. It has an exciting future.
Thank you. Thank you, Tony, for those questions. If you wanted more detail, Tony, please just reach out and we can provide it. I am sure the rest of the callers appreciate it being kept at a high level. Moving on now to Kevin Ascott, who's asked a couple of questions. Kevin's first question is how strong? He's asked if we can provide it as a percentage, but generally speaking, how strong is the sales momentum at the start of the second half compared to the start of the first half? Do you have a forecast range for total revenue for FY2026?
We gave a forecast range at the ASM, and that was around about the $130 million revenue mark from memory. We're still on track for that. I think as far as what's our order book looking like, I think probably firmer than at that stage when we gave that. Probably we've seen a lot more activity in the last couple of months in particular. It's more now about how we can get more out the door with the facilities we have, which was the reverse to 12 months ago.
Thank you. Kevin has just asked a question just for any comments on impacts from U.S. tariffs. Is there any comment to make there? Is there any impact being felt?
From our side, the answer still remains no. It's still a fluid situation, but I think we gave some, we articulated on how it impacts us or not really. It's still the same situation that the impact of those tariffs on our business thus far is minimal, if any.
Great, thank you. I'm not seeing any other questions here, so I'll go back to the questions that were provided by James Lindsay. James Lindsay has a question on gross margin now. Gross margin lifted meaningfully year on year. You called out operating leverage as always returned. We saw this margin uplift most in Telco. Is scale the only uplift or a bit of product mix as well?
It's both, but when we have volume, our choices in where and how we manufacture mean we can optimize. We've been able to do that. It's been a very positive six months on that front, and product mix and where we manufacture are two key parts, but we can use all of our facilities when it lifts for us.
Another gross margin question regarding AI and Data Centre segment. James is asking, where will AI margins sit on a gross margin basis once they come in, and will they be similar to the rest of Telco?
We expect they will once the business is established and we've got our rhythm. Part of our business is at the start, we have to bed down our production lines and get our yields right. That affects a little bit upfront how the gross margins land. That is what Rakon's been very good at, getting the yields bedded down and getting processes ticking along, getting something established and making the most out of it. We would expect once we have that sort of, I guess, six to eight months of track record that we'll see it at least match, if not better, other Telco margins.
Good, thank you. I am just seeing a couple of questions coming through that are not related to the results or the business update. I encourage people who want to ask questions about anything not concerning those two areas to email them through, and we can answer them after the call. Just returning to some questions again from James. You mentioned $2 million of margin uplift attributable to the Indian production transfer, 25% already transferred. Would you expect these kinds of gains to scale linearly as you reach around 80% transfer?
Yes, I think I would not say linearly, but let's say proportionally, yes. There are still quite a lot of gains to be made on a number of fronts, not only as margin gains, but also footprint optimization. Yes, I would say it's proportional. It's going to be proportional.
Just a final question here from James. The second half is, oh, he says, the second half is normally much stronger than the first half. He just wants to know, can you give us any indication on how you're tracking in the second half so far?
What we can say is that our October result slightly exceeded our plan. We haven't seen November numbers in yet, but at this stage, we're tracking well against our annual operating plan.
Fantastic, thank you. I'm not seeing any further questions. Reminder, if you had any questions that were related to something other than today's update or the results, please email those through to investors@rakon.com. That concludes today's presentation. You may.