Nodestream Ltd (HTG.AX) Earnings Call Transcript

Good afternoon, everyone. Thank you very much for joining us on this afternoon. A particular thank you to those -- for those of you joining at 00:00 on the East Coast. We hope I plan to have these webinars for our stakeholders, investors on a regular basis. We're hoping to do it on a monthly basis. I'm joined today with -- by our Chief Product Officer, Damiain Brown. The intent is from time to time to introduce you to other members in our executive team to really build understanding who's at the helm, who's driving the decisions, both on the sales, the business development, the technology development. I'll hand over briefly to Damiain to introduce himself.

Hi. Good afternoon, everyone, and thanks again for joining. As V mentioned, Damiain Brown, I'm the Chief Product Officer here at Nodestream. I've been with Nodestream since 2020. I started my career a little while ago in broadcast engineering and operations, and then moved into subsea, remote operations and technology development. With Nodestream, I was fortunate enough to be part of the world's first subsea remote operations trial for asset integrity purposes. And yes, I've been enjoying the ride ever since. So I'll hand back to V for a little bit more context on today.

Thanks very much, Damiain. So in terms of the agenda, how we plan to run this webinar is I will take you through an update -- an operational update, business development and pipeline development across regions and also channel -- diversified channel approaches and types. I will also articulate what we believe are reasonable revenue expectations in the short to medium and long term, but also articulate some of the obstacles that we are facing. So I remain steadfast that in the 4 months that I've been -- 4.5 months that I've been in the role, we've achieved a lot. We are facing a challenge in the sense that pivoting towards a defense and national security market requires from us to be defense-ready. And I'll address what that means. But essentially, as would be well known to lots of you, there are high entry barriers to that market, to those markets. And that's something we've been investing a lot of effort to address, to be really match fit and pursue and indeed win the contracts of the size and orders of magnitude that are ahead. So let me first start with geographical region. I'll start with the U.S. first and foremost, particularly on the back of our first trip to the U.S. a couple of weeks ago. I know that's been a great area of interest for our investors and stakeholders. We had provided an announcement to the ASX a couple of weeks ago in terms of the outcomes and most importantly, the appointment of a U.S. lead to be really our boots on the ground and continue to progress a lot of the conversations and early engagements that we've had, but also to generate new ones because it's much easier, much more effective to do so on the ground in person. So where are we today? In terms of the Pentagon engagement that we had, we have now progressed and are now in the Pentagon, what's known as the TREX program. So we have been validated. We've gone through 3 initial steps, and now, we're waiting for essentially to be slotted into a calendar of funded 2-week integration testing and trial in country. I expect for that to occur next calendar year. We do not have any more specificity than that. Obviously, aspirationally, it would be fantastic in the first half of the year, but this is something that we don't control. We've also just recently been invited to pitch for a program called SOFWERX, which is -- which brings together USSOCOM stakeholders. We're currently in the process of finalizing that pitch, and it has been scheduled for early next year. The conversations in the U.S. that we had with the United States Space Force have led to follow-up pitches to what is called the Joint Commercial Operations cell. And on the back of that, they introduced us to one of Canada's prominent geostationary operators. So what we're working through with them at the moment is Nodestream's application in space domain. In fact, one of the heartening and wonderful things about all these engagements that we've had is the discovery and validation that indeed, Nodestream is asset-agnostic, not only network- and integration-agnostic, but asset-agnostic, whether it be humans from a telehealth application, whether it be cars, buses, whether it be drones, indeed, whether it's satellites in terms of data transmission from satellite in orbit down to ground station. So coming back to the Canadian geostationary satellite program opportunity. This particular company is building a low Earth orbit constellation for purely for government and defense consumers. The introduction from [ USSF JCO ] is for us to integrate into their product and pitch to the JCO cell in terms of service provision. So in terms of time lines, we're currently under NDA and we'll be progressing to technical workshops pretty quickly. We also are currently finalizing a teaming agreement with a very innovative, again, U.S.-based quantum enablement company. Why we are excited about it is because they have established contracts both with government and defense. And once we complete a teaming and integration scope, we see an opportunity to co-partner with them on pitches to their existing customers as well as new ones, and vice versa back in Australia. The other major update in the U.S. is we, in fact, hot off the press as of yesterday, have secured an NCAGE code and what's called SAM.gov registration. Now why that's significant is that only as of yesterday are we eligible as a foreign company to tender for U.S. programs. And this, again, I highlight that whilst we're playing for the sky, we're playing for fantastic horizons in terms of order of magnitude of market and revenue opportunities, it does come with a lot of heavy lifting around regulatory and compliance. And being commercially ready is one part of it. The other is in the U.S. context, CMMC, which is a defense readiness and governance accreditation, we also have to explore and we're also working on that, uplifting our cybersecurity and resilience. There's more ISO accreditations, for example, ISO 27001 and others. So whilst this is a lot of effort, it goes a little bit unnoticed because it kind of gets us to a level playing field to then be actually to have those contract negotiations and, indeed, progress to monetizing all these engagements. I'll now -- having covered off U.S., I'll mention Ukraine. So again, as we communicated to the market a couple of weeks ago, we employed -- engaged a world-renowned drone specialist, Ukrainian like myself, Dr. Oleksandra Molloy. And in the time that we've been working with her, we've taken steps to grow the TechnoPark MOU partnership, and we've now developed a program of works. We're also working with 2 other parties in Ukraine who have deep connections to manufacturers in Ukraine, and we are about to deploy starter packs for them. This is contingent on securing an expanded Ukrainian export license, which we are almost completed. But again, as you can imagine, it's a process because it's an active battle zone that takes time and then there's rigorous requirements, including DFAT specifications. One positive thing that I wanted to mention is that we've become aware that the Ukrainian government has sent a formal communication to the Australian government confirming that Nodestream has indeed been used and validated in the battlefield in Ukraine. We see that as an opportunity to open up discourse from a government relations perspective and see how Australian government could support an expanded supply to Ukraine. The other part of it, obviously, is there's a lot of companies, whether it be in Australia or in the world more broadly, that talk about they've been tested or we've been tested in the battlefield in Ukraine. Unless you have independent validation, often it's treated as a paper tiger, as just words. So we're very much working on providing that independent validation. I'll now pivot to Australia. So we have had a number of very senior level engagements with Australian Defense Force representatives. We briefed most recently -- and this is in the past 2 weeks alone. We've briefed to the Head of ASCA. We briefed to the 3 service heads of capability. So the Head of Air, the Head of Army and the Head of Navy capability. And when I say briefed, I'm not talking about a PowerPoint demonstration with slides. I'm talking about that they allocated more than an hour for us to actually demonstrate Nodestream in a simulated scenario of performance under various packet loss and electronic warfare jamming scenarios. So an outcome of that brief was identification for us of a number of program -- funded programs of record and introductions to defense primes in Australia to work with. And indeed, that's probably one of the things that I'm most proud of, is that we're no longer just pursuing opportunities in the sense of here's what Nodestream does, where would it fit? We are continuing to sharpen the focus in terms of actual committed pockets of money, buckets of money. So on the Australian Defense Force side, it is programs under current delivery that we are pursuing from a contract amendment, contract extension perspective. So for example, there's a number of contracts around vehicle delivery. Nodestream -- what we're pitching, Nodestream would provide an expansion and improvement to comms in those vehicles. And that's just one example. We also have upcoming briefs with the Chief Information Officer for Australian Defense Force, and we're also speaking with the Head of Space and Cyber Capability. One of the other exciting things that we are currently in progress, we are under NDA with an Australian rocket, a well-known Australian rocket company that will be pitching for what is known as -- previously known as JP9102, but is now known as SPA9102, which is Australia's largest sovereign future SATCOM program. So we're looking at being part of their solution for that program. Now coming back in a little bit more detail around defense primes. So we started out probably with one prime engagement when I joined Nodestream but I'm proud to say that we have significantly expanded the pipeline of conversations. So I'll list just a few. And these are -- I will say that these are obviously, in the interest of -- observing confidentiality, I can't go into too much detail. But we're speaking with Boeing, we're speaking with L3Harris, CGI, Saab, Rheinmetall, Hanwha, Systematic, Shield AI, Dell, Northrop Grumman, and I should also mention Thales, various stages of engagement, some for programs of record, others were being onboarded right now as a preferred supplier in their supply chain. I will mention in the interest of transparency and truthfulness that whilst we're getting a lot of positive feedback, as I mentioned before, and this is just the reality of what we are contending with, is that we need to really fast track our governance and compliance. So in the Australian context, it is being DISP-accredited. So DISP is the Defence Industry Security Program. Now the standard expectation for an SME going through that process is 2 years before you get accredited. Now we are about to submit this month a fully compliant DISP application, not at Level 1, not at Level 2, at Level 3, which is top secret. And we expect that to convert -- to turn that process around between 6 to 12 months. Now I'll also mention -- sorry, there's 2 other areas that I should mention. We are -- in terms of Europe and the Middle East, we're currently running 2 live trials, one with a NATO European defense force and another one in the Middle East. We expect those trials to complete this calendar year with commencement of negotiations around contract terms and deployment for start of next calendar year. In fact, a lot of these opportunities that I'm talking about, whilst we're hopeful of some contract wins this calendar year, my expectation that we will start landing the million type contracts first half of next year with significant upswing by the second half and commencement of the next financial year. We are also focusing on commercial opportunities. In fact, I've just gotten off an e-mail exchange. We are very close to signing an enterprise agreement with an Australian maritime company that we expect to be completed this calendar year. I'll probably stop there. Hopefully, that provides some insight in terms of all the various approaches and indeed, the progress that we have made. And at this point, what I offer is to do a bit of a Q&A with Damiain around our technology and product road map to really highlight what's been happening behind the scenes and what has clients, our customers, our potential customers so interested. And I say this particularly with reference to a commercial analysis assessment report that we just received earlier this week that was commissioned by the Board, an independent assessment, which indeed validated that Nodestream has a highly valuable value proposition.

So Damiain, I'll jump into the first question, if I may. Would you please tell us about -- talk about our technology differentiation and value proposition?

Sure. Thanks, V. So I suppose principally and in base terms, the problem that Nodestream solves is really around the challenge of delivering mission-critical video, audio and data over constrained, contested or unreliable networks. So in a nutshell, we're moving data over intermittent pipes, and we're doing so very well. But couple that and compound it with the efficiency, the bandwidth efficiency at which we can move things, like video, as an example, and also compound that further with the resilience aspect of the protocol. So the ability to maintain communications through degraded connectivity and, I suppose, recover quickly when it's interrupted, all of these sort of factors combined make Nodestream into quite a unique product with a very compelling value proposition, as V said. And I think the driving factor in our sort of strategic push into the defense space was really due to overwhelmingly positive feedback from -- or on how Nodestream performed from defense operators in contested environments really gave us the confidence to sort of pursue this angle.

Thanks, Damiain. I'll go to the next question. What is our integrated product platform and deployment?

Okay. So for those that are unfamiliar, historically, we've had 2 separate platforms, one for distribution and sort of disclosure for monitoring -- for video monitoring, basically, a distribution platform. And we had another one called Nodestream X for the whole peer-to-peer type of interaction. Just over 12 months ago, we launched the One Nodestream initiative, and that was really around evolution of the existing Nodestream products into a single offering. So bringing Live and X into a cohesive remote operations and collaboration platform, if you will. And I suppose it's also interesting to understand some of the reasons behind why we're doing this. Number one is because it's what our end users want. They love the functionality of both platforms, but they wanted them combined. Also, it makes Nodestream a lot more accessible from a deployment standpoint from how quickly people can get on board. It has huge implications for our network adoption, but also, it reduces our technical debt. So instead of maintaining 2 platforms and 2 frameworks, we're only doing 1. So hence, it reduces our sort of development costs and overhead. But not only that, it allows us to build things better and also quicker. So I mean, the team has been working hammer and tongs on this for quite some time now for most, if not all of this calendar year. And we're really closing in now on the exciting part, which is getting it in front of users. So we'll have the first of a series of major releases and product updates later this month, but the plan is to have the vast majority of this completed this calendar year. So it's a really exciting phase for us. And we're looking forward to letting you all know a little bit more about it in the coming weeks and months.

Thanks, Damiain. Tell us about our product maturity and operational validation, please.