Rakon Limited (RAK) Earnings Call Transcript

Welcome to Rakon's 2025 Annual Shareholders Meeting. My name is Nick Laurent, I am the Investor and Corporate Communications Manager here at Rakon. Just before we begin a few points of housekeeping. This is a hybrid meeting with attendees joining in person and online, and it is being recorded by Recon for transcription purposes. We do ask that anybody recording the meeting online does so for notetaking purpose only and not for publication or distribution of the video or audio. Taking photos and recording video or audio in the room is not permitted. I'm sure you are all now familiar with hybrid meetings. But as a quick reminder, for those of you who have your screen at any time throughout the meeting. We will address your questions after the Chair and CEO address, where we have time for Q&A. Please note that questions may be moderated or aggregated if we get mobile questions on a similar topic, we also reserve the right not to address questions that, in the opinion of the Chair of the Meeting are not reasonable in the context of an Annual Meeting of Shareholders. And if we run short of time unanswered questions may be addressed after the meeting, and you can also e-mail us at investors@rakon.com with any questions after the meeting. Voting today will be conducted by way of a poll. For shareholders online, you can cast your vote under the vote tab. Should you require any assistance, you can type your query into the chat function on screen, and one of the Computershare staff will assist you. Finally, a quick reminder that during today's presentation, we will make forward-looking statements about Rakon Limited, and the environment in which the company operates. Because these statements are forward-looking, Rakon Limited's actual results could differ materially. I encourage you to read the disclaimer slide in our presentation for more detail. Thank you for your patience. I will now hand over to Rakon Chair, Dr. Mark Bregman, to formally begin the meeting.

Thanks, Nick. Good morning. Welcome. It's great to see a good turnout today from shareholders both here and online. I'm Mark Bregman, I'm the Chair of the Rakon Board. And I'm pleased to confirm we have a quorum of shareholders. And therefore, I declare this 2025 annual shareholder is open. I also advise that online voting is now open on all items of business. So today, you'll hear from myself and also from Sinan, our Chief Executive, before we open the meeting for shareholder questions. And then following that, we'll cover the resolutions. And there will be an opportunity after that for other general business that shareholders would like to discuss before the meeting closes. And finally, all of you are invited to join the Board and the Rakon team for refreshments at the end of the meeting. I'm relatively new to Rakon. I'm happy to be joined today by our current Board members. And also sitting with us, as I mentioned, Sinan here; and Mark Dunwoodie, our CTO. I'd also like to welcome our representatives from the auditors, PwC and our solicitors. As shareholders will be aware, there have been a number of changes to the Board, both in the last year and in the last weeks. I think it's important for shareholders to understand these, so please bear with me. Since the last annual meeting, 3 independent directors have stepped down, Sinead Horgan, Keith Oliver and Keith Watson. The company would like to thank them -- thank all of them for their contributions and for their efforts on behalf of Rakon. To fill these vacancies, the Board undertook a professional considered an in-depth recruitment process to ensure we had the right directors with the right skills to lead Rakon into the future and to deliver value for shareholders. I joined the Board last year in October. And we're also privileged to welcome Jon Raby, who is here; and Dr. Lisbeth Jacobs, who is not here today as she had a commitment elsewhere. Both of them joined earlier this year. They're both highly qualified, industry fluent and internationally experienced. Their appointments as well as mine were unanimously supported by the full board, including the nonindependent directors and shareholders, Brent Robinson and the Siward Crystal Technology Ltd. I note that this support only changed after Brent was advised that he had not been selected for the chair role. It's with regret that we received notice last week that Jon and Lisbeth have chosen not to stand for election at this meeting. It's a real loss for Rakon. During their time, they contributed valuable expertise and strategic oversight and demonstrated the highest standards of governance in the interest of all shareholders. Jon and Lisbeth agreed to remain as directors until the end of this meeting to ensure Rakon continued to meet the NZX obligations regarding director independence. Thank you both. Lisbeth, as I said, passed on her regrets that she cannot be with us today, but Jon is here, and he will be happy to take questions from the shareholders later. The rules require that the company have 2 independent directors on the board at the end of this meeting, and one of those needs to be the Chair of the Audit and Risk Committee. About 1 week ago, when it became clear that a compromise of the largest shareholders could not be reached despite months of discussion, the independent shareholders concluded that we must, in the interest of the company and all shareholders pursue a path to avoid breaching the listing rules. We, therefore, undertook a strategy to ensure that Rakon would remain in compliance with the NZX rules. Now previously, Lorraine Witten had advised that she was going to step down. However, following discussions with the majority of the board and ensure that Rakon continues to comply with the NZX listing rules, she's agreed to stay on and she will remain on the board and will be the Chair of the Audit and Risk Committee immediately after this meeting. When Lorraine originally announced her intent to retire, the Nominating Committee undertook a search with the help of a leading recruiting firm to find a new independent director to fill her role. A number of candidates have been identified. And after a series of interviews, interviews, we identified a strong candidate whose background and skills help strengthen the Board. Yesterday, we announced the appointment of Peter Baines. Peter was recommended by the Nominations Committee following a thorough review process. Peter's qualifications and experience are extensive. He is a highly experienced technology executive and director with over 25 years of leadership -- executive leadership experience, spanning telecommunications, manufacturing, R&D and commercialization, both in New Zealand and internationally. His expertise in global technology, high-technology manufacturing, investment and commercialization of cutting-edge technologies are all considered to be a value to the Rakon Board. And he will join the Board effective at the end of this meeting and will stand for election at the 2026 ASM. Now in my introductory letter to shareholders a few weeks ago, I outlined my view, my vision for Rakon. Rakon's technologies underpin some of the most advanced and demanding systems in the world, and I believe the company is in an exciting and pivotal moment with significant opportunity ahead. Rakon has huge potential to lead in global tech sectors such as AI and space, and we're already making excellent progress with orders from some of the largest global players. The investment and work that's been undertaken in the past few years has positioned Rakon to capitalize on these opportunities, and we're ready to rise to the challenge. We're benefiting from the foresight shown in developing our India facility, which now gives us more resilience and flexibility. The current expansion of manufacturing in France will also allow us to scale up quickly to meet escalating demand, especially with U.S. or with the EU-based manufacturers benefiting from the recent NATO commitments to defense. Multiple new products have been developed and tested and launched commercially, specifically targeted towards these major growth sectors such as space and AI. We have a strong and capable leadership team that bring years of international and sector experience to Rakon and a committed an expert workforce. Over the past year, there's been a priority focus on cost and efficiency, and Rakon has a strong balance sheet and funding headroom to execute our current initiatives. Now the downturn in telco and positioning that we experienced is now starting to turn and the potential growth from space and AI is exponential. So we need to make sure that we can stay on that wave. The significant rebound we saw in the second half of fiscal '25 has continued, and we're expecting a strong fiscal '26 performance. Sinan will talk more about our strategy and progress shortly. When I look at Rakon, I see a company that's position is enviable. We're operating in markets that are -- that are expanding rapidly, as I mentioned, AI, aerospace and defense. And that, alongside our established strength in telecom infrastructure and positioning create that enviable position. These are sectors shaping the future of communications, navigation and security. Our focus across space, defense and AI lets us take more of a portfolio approach and reduces risk in the case of an individual sector slowing down. In the meantime, we should capture as much business as we can as we see this recovery. The value is clear, and our task is to leverage it through the right capital, the right investment and the right execution so that we can fast track scaling up the business. We need to build our balance sheet and encourage investment from international technology investors view Rakon as an attractive opportunity and understand strategic relevance of our technology. This is an area that I have decades of experience. In fact, I was very recently in the U.S. on other business, talking with investors in the tech industry about a number of topics. First of all, they see the investment climate improving in the second half of this year with large investments, which you've probably seen, in AI and data centers, defense and aerospace. With the continuing focus on supply chain and the use of sovereign technologies produced under the laws and control of trusted allies, such as New Zealand, it puts us in a very good position to be a good supplier and partner for companies in the U.S. and the European Union. I'm excited about what Rakon can achieve. By working together, we can ensure that Rakon not only meets these challenges, but defines the standard for what a New Zealand technology company can achieve on the global stage. Thank you very much, and I'd like to hand over now to Sinan to talk about Rakon's progress and the steps we're taking.

Thank you, Mark. [Foreign Language] and good morning, shareholders. Thank you for being here and online. And I'd like to acknowledge our Chair, our Board, my leadership team and our employees as well, in addition to shareholders. Maybe just to name a few of our employees. [ Arun Parasnis ], our MD of India; [ Jolie ], no, I'm just joking. He's our auditor. [ Nick Portney ], our Chief Operating Officer; Adam Robinson, our MD of Commercial Business Unit, and [ Michael Mackelroy ], he's our Chief Innovation Officer. And they will all be available to speak with you after the close of formal business. Today, I'd like to speak about 3 themes that actually run through everything that we do. These are progress, performance and potential. Progress is the base that we built in the last 3 years. Performance is what you will see in the slides in our numbers and potential is where we will take Rakon next. And we will reach up strategy and what we delivered in FY '25, a year of 2 halves. We're going to talk about our strategy moving forward in the coming 3 years in front of us. We're going to talk about our current momentum, our guidance and our aspirations for the future as well. Before we go any further, a quick word. Obviously, a lot of you have been seeing items related to the Board, the Board composition, there has been a lot of news. I just want to say that regardless of the Board composition, the company is focusing on running the business, executing and getting Rakon to the potential that we deserve. So from our side, I can speak for myself, my management team and all of our employees. We are just focusing on the business itself. I just wanted to make that statement because of the fact that I have been approached even here by a lot of people and elsewhere, but be assured that we are actually focusing on the business first and foremost as Rakon. And our strategy is our operating system, and it's quite simple. Our strategy is quite simple. We operate where growth is. We have AI hardware, aerospace and defense, alongside of our foundational segments of telecom infrastructure and precision positioning. And we keep customers at the center. We invest in the right talent and right technology to deliver the right products, and we scale and execute with discipline through our global operations. We win by scaling our product platforms and our technology for the world stage. And we have put in a lot of energy in some of the technologies that you have heard me talk about before, our semiconductor chip technology, our XMEMS NanoQuartz technology. And we have quite a few more in our quiver that we are actually using towards building products that are world leading. And moving forward, we have and we run through a global operation for the purpose of speed, resilience, scale and cost. And I'll talk about a little bit more about our organizational transformation that we have gone through that actually is putting more coal under some of these areas moving forward. So we have changed our organizational structure effectively to match our strategy. And moving forward, we have refreshed our strategy. I'll talk about that in a moment as well. Our travel direction is the same. It has not changed. But what we have added is speed, discipline and some guardrails that will allow us to scale but with control. Now talking about the last 3 years. In the last 3 years, we created some fundamental building blocks and diversified and enhanced our markets. We added new growth drivers, and we develop new technologies. We have also aligned our global structure with strategy, as I mentioned. And in Aerospace and Defense, FY '25 revenue reached $42.4 million. That was a 15% year-on-year growth in new high, and that was a record high per time in a row. So that business has been growing quite steadily. And we launched a number of next-generation subsystems, and we want multiple space contracts. Those wins are important because they have set us as a leading supplier in space globally. And in AI and cloud, we said that was fired this to become a core market for Rakon. We are very much on that path to do so. We will achieve meaningful revenue from AI in FY '26 and we are already investing to expand our production in New Zealand in anticipation of the demand ramp for AI. And for telecom, as you know, the last 2 years tested us in telecom in terms of demand. But as you have seen in the second half of FY '25, we had a substantial recovery and that momentum is continuing. I'm pleased to say that we are seeing substantial signs of recovery stabilization first and recovery now. And that -- I'll talk about that momentum in a moment as well. We released also within the last 3 years and 2 of them being in the last year, 3 new semiconductor chip platforms, including Vulcan, which is going to be a leading-edge product globally that will serve us well in a multitude of market segments. And we have mostly completed our New Zealand to India manufacturing transfers, reorganized into market-focused business units, as I mentioned, and realigned our leadership to sharpen our execution. These streams of work set the foundation for growth that started in the second half of last year that we expect to scale in the coming 3 years as well. Now talking about FY '25, a year of 2 halves for us. There was, as you know, a substantial difference between the first half and the second half. The second half revenue was up 49% with respect to the first half of the year. and our gross margin was up 9%. And our underlying EBITDA ended at $ 9.5 million. That was around the midpoint of our guidance but that was after a substantial second half swing of $16.8 million. And aerospace and defense strength and telecom stabilizing actually with 2/3 of the revenue in the year coming from the second half contributed to the second half ramp, and that set the launch path for us for FY '26. We tightened also our cost base while protecting our long-term investments and growth. The normalized OpEx reduced by 10% while we kept our R&D investments steady and the inventory reduced by 16%, releasing about $8.5 million of cash. Some transfer and transition costs remain as we complete and first to India, but they unlock substantial structural cost benefits for the company as well. Rakon retains a very strong balance sheet, relatively speaking. We have net assets of $155 million. Debt facilities include significant capacity for investment into capital initiatives as well as growth opportunities. Our organizational realignment and global systems work has alleviated the global inefficiencies in our organization lifted our accountability and will substantially improve our customer focus. We matched highest-value roles to our best people, we continue to do so, and we unleashed significant structural cost benefits as well. The important outcome of all these steps is that our operating leverage substantially improved as volumes also recover. We sustained R&D at about $22 million last year in FY '25, and approximately $10 million of that was capitalized. These were capitalized for programs moving into revenue. And that's an important point that ties our R&D to actual return on investments. And the main areas that we put R&D dollars in aerospace and defense, AI, as I said, we released 3 semiconductor chips and a portfolio of subsystems. Now we have consistently, as you can see on this chart, we have consistently invested into R&D. Even when our revenue was going down. And the reason of that is very clear. And we'll continue to do so. I said this last year, I said that the year before. For the company, these are the dollars that actually count most for us because it keeps us at the cutting edge of technology and ahead of competition. We have been funding what wins and not inertia. And we have put in guardrails, stage gates and quarterly reviews into R&D programs to make sure that we actually have R&D today leading to revenue tomorrow. And now talking about the coming 3 years, you can't think of FY '26 to '28 as execution upgrade of our previous strategy. We have more growth drivers, faster resource allocation and well-defined guardrails so we secure growth and accelerate. AI and cloud, our plan is to convert orders into meaningful FY '26 revenue within this year and scale capacity, broaden our product portfolio with more qualifications next year and by FY '28, we want to become the default global supplier in that space. Aerospace and Defense, we will execute the awarded programs with expanded capacity will ramp up systems. We'll extend our Mercury, our space chip-based portfolio, and we will broaden our U.S. penetration as well. And telecom and positioning, the cycle, as I said, has stabilized. Now our customers are focusing on growth through densification and fixed wireless access pockets. Now while they do that, we put our focus on upgrading our installed product base with our new products that utilize our next-generation semiconductor chips and our latest XMEMS NanoQuartz technology. In operations and systems, we continue additional New Zealand to India transfers, and we will shortly start trends to India transfers as well. We will harmonize core processes. We have quite a lot of work that's going on going in this area. We will also embed quarterly reviews. As I mentioned, that will go through every project and we will make a decision to keep, accelerate or cut. Now our long-term potential rest on disciplined investments in technology and elsewhere, all parts of the company. The budget to strategy and allocate dollars accordingly. Our portfolio guardrails, as you can see on the slide, are well defined. We spread 60%, 30%, 10% across core next-generation and optional business, which also corresponds to Horizon 1, 2 and 3, which effectively means that these guardrails allow us to keep a balance between our efforts to lead the core, develop our next-generation and also look at further down the horizon to optional moon shot business, which we always do. We have adopted capital discipline and are releasing capital through the stage gate process that I mentioned and with a review every quarter. The bar is simple. We are looking for clear paths to having return about the weighted average cost of capital. and with measurable impact on cash, margin and our share in the market as well, which is an important factor. And this is how we convert opportunity to returns. And alongside the risk mitigation matrix, this approach creates transparency and speed in what we do. And it makes capital discipline and operating cadence tighter by making the approach systematic. Now moving on to guidance. We released our guidance just this morning. For FY '26, we guide an underlying EBITDA of $15 million to $24 million for the fiscal year '26. What underpins this range is the continued aerospace or defense growth stabilization and recovery of telecom and the start of AI revenue within FY '26. Add to that a tighter cost base and the cost measures that we have taken that have changed our cost base substantially. Sensitivities remain timing, mix, inventory FX and supply chain disruptions. Overall, the momentum is real. There are 2 numbers there. I just wanted to put those out there as an FY '26 year-to-date snapshot compared to this time last year. So it's a year-on-year comparison, the numbers at the bottom. We are doing substantially better. Revenue is up by 28% year-on-year and our gross margin is up by 7% to 50%. Now moving forward to our aspirations. So for FY '26, again, the project to scale toward $120 million to $130 million revenue, although our EBITDA guidance is what you see here, it's $15 million to $24 million. So please don't take what's on this slide as guidance, but it's aspiration. Our only guidance is for our underlying EBITDA for $15 million to $24 million. But that corresponds to roughly a revenue of $120 million to $130 million this year. And what we are aspiring to do is to scale toward the $250 million revenue by FY '30, with upwards of $75 million EBITDA. This is an organic growth plan. This is based on our strategy, and it is based on also our sole strategic execution in the last 3 years. And actually, our current trajectory based on our existing strategic plan that I mentioned for the coming years. Once again, these are aspirations and not guidance. And they depend on a number of factors, as always, beer counting continuing space and defense momentum. AI and cloud scaling telecom acceleration as well as the structural cost benefits that I mentioned from organizational efficiencies that we have unlocked and we will continue to unlock economies of scale improved margins and overall execution. So summary, progress, performance and potential. We rebuilt the base. We reset the performance, and we are positioned to convert potential into scaled results moving forward. Before I close, I wanted to yet another personal words. I just want to say that regardless of how our Board composition evolves, my focus is and will be on running the business, as I mentioned. And my job is to get Rakon to where the company deserves and that is my focus. That's the management team's focus. That's all of our employees' focus moving forward. With the Board, we will always work very closely regardless of the composition with regards to our strategy, our talent, our technology and our risk, and we will seek our boards help to help us accelerate our plan and put the priorities in the right areas. And as always, I really believe in this company, and I really believe in our team, I really believe in our potential. I am very excited about the path forward, as I have always been. But moving forward, I want to thank our shareholders once again for your support, a lot of you has voiced support for the company overall. And I thank you very much for that on behalf of our management. Thank you. I'll pass it back on to Mark for Q&A.

Thank you, Sinan. I now want to invite any questions on the annual report or the performance and business of the company. We will then shortly move on to the resolutions. And I'll invite discussion on those at that time. So for now, please focus on the presentations and any questions about the company. As a reminder, only shareholders or their validly appointed proxies or corporate representatives have the right to speak or ask questions here. For those of you who are here in person, please raise your hand and we'll bring over a microphone to you when it is your turn. Please remember to say your name, speak up. So that those joining virtually can hear you as well. Questions may be moderated online or if we receive multiple questions on one topic, they might be amalgamated together. Any questions not answered in time will receive an e-mail response after the meeting. I propose to start with questions from management on the annual report, the results and the company performance, and then we'll move on to questions for the Board. So I'll start with any questions in the room. Over here. There's a microphone coming to you.

[ Graham Wakefield ]. My question is to you, Sinan. I believe that I'm right that you were on the Prime Minister's delegation to India recently and of course, you've opened and commissioned the manufacturing facility there. So my first question relates to the potential impact of tariffs on India from the United States of America? And what impact do you anticipate that would have or any workarounds that the company has in place to mitigate that impact?

Sure. Thank you. Yes, I was on that trip, and the tariff question is a very valid one. The short answer is that it's still fluid, but from our side, I guess, maybe just to put it in context, sorry, where the tariffs apply is the business that crosses the U.S. border. And while we have quite a lot of U.S. customers as well, the business that we do with them for manufacturing in U.S. is a small portion of our business. We quantify that and the first tariff situation started unfolding. But also in addition to that, when you look at the tariffs, especially for electronics and especially for what we do frequency control products, there are different categories of it. So from our side, what I can say so far is that we have not been substantially impacted by it. I can say that the impact has been minimum to now from our side. There are parts of it that actually is still fluid, but we are working with we are working quite closely with people that are experts in the field to ensure that our products are categorized properly, those that go into the U.S., they get categorized in a certain way that we are not going to be exposed to more tariffs than we need to. Let me put it that way. But it's just still fluid. I am sorry, I don't have an exact answer to you in terms of hey, this is the exact impact. But if you ask me what is the impact now, I could tell you that it's minimal to none. [Operator Instructions]

And can I just also ask the amount of revenue that you've generated in India from your products in the current year? And how you see the penetration in India increasing as a result of having established the manufacturing facility there?

Thank you for that question as well. Maybe just to also put it in context, we had a manufacturing presence in India going all the way back to 2008. Actually that's when we first formed the joint venture, but it was a joint venture. In 2018, we actually fully acquired the joint venture partners' stake to make it Rakon India. What we opened is our new factory, which is now our manufacturing center of excellence. But your question is still nonetheless valid in the sense that our local presence there, is actually received extremely positively by this growing Indian market as well. We have traditionally been a participant in the local markets in India. But now there are customers there that are actually playing for the world stage. Someone like Reliance, for instance, it's an over $ 100 billion U.S. company. I'm giving that as an example. So us manufacturing in India is a huge advantage for us because they have the Indian government has a Make in India initiative that actually, we are almost on the game in town in our own technology domain that actually is manufacturing in India. So yes, your question is very valid, and it is impacting us very positively, and it has a lot more potential to go. And in the trade mission, yes, I think I was there. Rakon is one of the few -- I guess one of the first and one of the few real operations in India. People have call centers and such or some remote team, some other companies do, but I think our insights and experience that we had in India was quite welcome by that mission.

Rakon strategy and that pathway to unlocking the potential in the future. Can you just explain a little in terms of how the Board has worked with you to create and leverage that strategy in a very practical sense that shareholders can understand that relationship?

Sure, sure. I think of us, Oliver, I can't speak to the exact details of what is discussed with the Board at any 1 meeting. But in general, again, as I mentioned, with all members of the Board, I can say that I have always thought very close collaboration. I can categorically state that and that we have discussed, we have had discussions with our Board about our strategy. And the Board has contributed to our strategy as it has always been. This is not new. It has been in the past and that is what I will strive for in the future as well because I always believe in my -- part of my job is helping the directors help the business actually. So I seek quite close relationships with every board member, past, present and future.

I think we have one here.

My name is [ Amit Shah ]. Sorry about my accent.

I'm sorry about mine as well.

Yours is much better than mine. So you were talking about $75 million EBITDA by FY '30. Could you please say something about the R&D costs in the next 5 years? And are you going to capitalize that?

Sure. Once again, that is an aspirational number. It's not a guidance. I repeat that. But for us, we have a continuum of R&D projects because that's how we actually survive and thrive. We have to stay ahead of our competition, and that does necessitate us to put a lot of energy on to R&D. So if your question is, hey, this capitalization that you had this year, is it going to just go to 0? It's not the case. As we scale the business, as we scale our technology we will expect our R&D capitalization to scale as well because, again, as I mentioned, we are tying our R&D investment very closely to the return on that investment not immediately for the future. and many things that we are doing now, many things that we started a few years ago actually will contribute to that. In our business, it's a very long cycle and it requires very careful thought process as to what, where we go, where we play, how we win what technology we need to make that possible and do R&D to create technology that doesn't exist. So innovation is a part, a systematic part of our cycle and it's not -- it is not very defined. So from our side, we try to ensure that we think very carefully long into the horizon. So many things that will result in revenue all the way in FY '30, I can say that at minimum, the thought process has already started. So it will continue.

Sorry, I have a follow-up question. So EBITDA is good but if the R&D cost is too high, the cash flow won't be that good, right, so it will affect dividends?

Well, it depends on what you expect where we get the company, our target is to lead by technology. And for that, again, when we scale our organization when we align all stores, we have seen in our past, and we will see this year that it actually creates earnings for the shareholders as well. So that's what we are targeting at the end of the day. I can't speak to a dividend at this point, of course. But I can't talk about the fact that, that R&D is mandatory in our cycle to make sure that we scale the revenue. Otherwise, we would not be able to lead the world. Again, we are -- I just want to put this in context. I repeat this every year, I guess. We are here in Auckland, New Zealand. You are looking at a company that is a global technology leader in its own field, a true tech leader, a Kiwi pioneer in its own field. How many such companies do we have in New Zealand? So our focus will always be on technology and making sure that we are on the forefront of it.

So it looks like we have a question from the remote or the virtual audience. It's from [ James Christopher Kohn]. And the question is, how does year-to-date revenue compared to the last few months of fiscal '25 after the resumption of hopeful trading?

After the resumption of hopeful trading? I don't know how to answer that. I have always hope, but I don't know. I'm not sure how to answer that. James, can you please contact me separately because I cannot put it in context to really answer it accurately for you. I'm hoping that you are hearing this Mr. James Kohn, please contact me directly. I'll be very happy to answer your questions.

Do we have further questions here in the room? We have one back here.

Thank you, Chair and CEO. My name is [ Sean Chen ], I'm the shareholder. So I do find that Rakon recently is one of my few best performance in the last 3 months. So I mean, I could manage to buy below $0.60 and then so recently at the peak over $0.90. But then at that point, I've been thinking one thing. I mean there are some fundamental concern expecting after the presentation. So several of my concern, for example, in terms of the comparative advantage, I've been thinking, right, internationally, why -- like that's what I'm thinking, why should consumers buy Rakon products instead of, for example, Taiwan Semiconductors and then those ones a very competitive one from Asia? That's the one thing. And then in your presentation, it seems to be some kind of undermine the utilization in the field of medical and health sector. And also lastly, your presentation has quite a lot of focus on the EBITDA. So EBITDA, so the earning before tax. But I do find the more meaningful term and measure is actually the net profit after tax, which is not mentioned. So I mean, but I'm looking forward, maybe one day, I'm getting back to buy more Rakon as I see it fit.

Any more questions? So starting from your first one, we don't have any consumer products, so we don't have any consumers as our customers. But your question is still valid. Again, maybe just to recap for people who forgot your first question. Why do people buy from Rakon, not from Taiwan or someone more competitive? We actually -- that is a good question in the sense that because we globally compete, although not in consumer markets, we do have competitors from Taiwan. We do have competitors from China. We do have competencies from lower cost base environments for sure, now we need to again have all the stars aligned for that. Once again, technology, we must lead by technology. So that is something that puts us ahead but also, we need to ensure that from the cost base, our costs are globally competitive because there is an important match between price and performance that we always have to hit the right spot. There is no situation where you have great technology, but it costs so much that people still buy it, they pay 10x. In very few areas where there are no competition, there is -- but we always need to make sure that we have a sweet spot when it comes to price performance, and that's how we approach it. So that's your first question. Let me go to the third one first. My presentation is not a financial statement. So I am focusing on EBITDA because of the fact that, that's what we guide. That's what we guided today. But you're absolutely right. Of course, net profit after tax is extremely important. And for that, there is a direct relationship between EBITDA and the net profit after tax. And that would be on our financial statements. But I -- again, is there any other thing that I can answer to with regards to that question? I can't tell you what our net profit after tax estimate is for the year because that's not what we are giving guidance on, although I have that number. And your second question was for medical, yes. Yes, absolutely. And that is probably -- that's a very valid question. That is still a market that we have some level of penetration, but it's not big enough for us to have it as a core market segment. We do have some penetration. There is still potential there that can be harvested but as you can imagine, we have to make some strategic choices because we don't have infinite resources. So we look at where we get the highest value for our dollars but notwithstanding, that is a market that is definitely a potential for us still. Still more?

Yes. No, no. It's related to what you mentioned because you mentioned about the price because you mentioned about the price versus performance ratio. And then you also -- I mean, I understand the sweet point -- the sweet spot in terms of some kinds of constraint optimization. And then in this case, do you have a comparison, for example, a global comparison of how your product price performance ratio and then those products compared to the other competitors around the globe. Do you have those statistics and data?

Would you like me to share those with you? If you want those, the answer is no, because that actually plays to our competitive advantage. But yes, of course, we do quite heavy competitive analysis. And unless actually fair well compared to our competitors. No better what we think we are doing, it has no value. So absolutely, we do competitive analysis, quite at length.

We have another question here from [ Kevin R. Scott ]. Can you please give shareholders a feel for the AI hardware business currently? How will it grow in revenue percent terms as a share of revenue?

I guess, Kevin is asking for over time, how that going to grow. I will go back, Kevin, to the response that I had on this. We are aspiring for the AI hardware market to be as big as our telecom infrastructure market moving forward. That is the type of potential that we are seeing in that market for us I can't give exact revenue growth terms, although we have it in our plan. I am not in a position to provide that at this point. But what we are aspiring is for it to be as big as our telecom infrastructure market.

Do we have any more questions here in the room? And I don't think we have any more online. We have one more here, 2 more, 3 more. It's like an auction.

Yes. I just wonder if you could share the revenue, how much -- what's the percentage of the revenue come from different countries like U.S., Europe, Australia, use. Can you share that information?

Yes, I can. There are 2 ways to look at it. One is to look at the origin of the customer. If you look at the customer regardless of where they buy it from then it would be almost evenly divided between U.S., Europe and Asia. However, if you were to look at where it's manufactured, a big chunk of it is manufactured in -- when we say Asia, I should say, perhaps Far East. So that would be the biggest chunk for us, followed by Europe and U.S. being about similar. So that is the extent of percentages that I could give at this point. But I can -- I'm happy to discuss that at the half year mark but not at this point.

Do we have a question over -- do we have a question here? Yes?

[ Ron House ], small shareholder. I'd like to ask what percentage of your after-tax profit do you spend on R&D? And has that changed much over the last, say, 10 years. I've been quite a long-term investor, only a small one, mind you, but I haven't seen a great trajectory of growth over that time. And so I'm wondering whether you've moderated the amount of spending on R&D or whether you have grown it? For contrast, I attend Nutrition Pike Healthcare's in your General Shareholders' Meeting yesterday, and they spend a very big percentage of the after-tax profit. And look at their growth, it's wonderful. Comments, please.

Thank you for being a long-time shareholder, first of all. I had a slide there that did show our R&D spend. That shows its trajectory over time. And it's funny because we -- a moment ago, I was perhaps defending when that gentleman asked, hey, are you not spending too much on R&D? And I said, no, that is our future. And the answer to are we moderating it? The answer to that is no. We are not moderating it. It is growing year-on-year. It will grow again this year. It is at its highest ever numbers at the moment. And we have grown it regardless of what the revenue trajectory has been in these past years. So I'm very happy to walk you through the numbers again. But yes, and I think FMP's path, that is extremely respect-worthy for us. Similarly, technology and R&D dollars are extremely important. And with regards to the share price trajectory, you said it from our side, that is not something that we set, but I can refer to a couple of years ago where we had where we printed $54 million of EBITDA. Our share price did not go back to where it was back 13 years ago. It was at $5.60, or you said 10, 11 years I don't know, maybe $3. It did not go there. It only went up to $2.21, although we printed an EBITDA of $ 54 million reconciled ever. So that is something that the shareholders and the share market, the capital market sets. But we are trying to do our best to actually put the company back on growth trajectory. And I'm, again, happy to report that we are back on that. Oh, after tax profit. Well, that is in yes, I was going to say infinity. But if you look at our revenue, this FY '25, I can quote our FY '25 numbers, our revenue was $103.7 million, and we spent $22 million on R&D. So it's quite high. It's actually higher than F&P, -- but again, every business is different, and I very much respect their business and how it has grown.

We have another question here online from [ Jurgen Martin Krystoski ], I hope I pronounced that correctly, and [ Michele Alain Krystoski ]. And they're asking with regard to the fiscal '30 aspirational targets, you mentioned that Rakon would get there with just organic growth. This doesn't sound very aspirational. How much can we rely on any moonshot products emerging by then that would really change the outlook?

So I guess, the way -- there are 2, maybe 3 questions in that. I will start with just organic growth. I think being able to get to that number with just organic growth is actually a bigger fit than organic and inorganic growth combined. So this when I refer to this aspirational number, this is based on -- we have a multitude of strategies layers to our strategy. What I have put out there is our strategy.

You might want to define organic versus inorganic.

Sure. I think people probably know it, but inorganic is through acquisition effectively. Organic is through our business that we have that we actually generate the revenue based on what Rakon's business is today and its growth organically. But yes, I think at the end of the day, we have -- when we look at an aspirational target, I think doubling the revenue in about 4 years I would not call that lukewarm effectively, what the gentleman is saying. But we do have also to answer the second part of the question, moonshot products Absolutely. We always have moonshot products. That's why I specifically mentioned that. And that is true this systematic innovation that we actually spend time and energy on. This has been the Rakon DNA. I'm not referring to this year, last year has always been the case for decades. And yes, though that 10% energy that we look at for the long term, actually sometimes results in maybe our highest growth driver. So we always have that as well. And Jurgen, if you have any other questions, please contact me also.

Do we have any other questions here in the room? We will in a moment. Do we have any questions online? It doesn't look like we do. So in that case, let us shift to questions for the Board. And a reminder that we'll answer questions on individual resolutions when they're put to the meeting. So we have questions on the -- for the Board members that are here with us. Yes?

Yes. Firstly, Sinan and Brent. Well, a great report. I'm a long, long-time investor, and I'd just like to congratulate you both and the rest of management. Fantastic. Last year, at the being Chair of Rakon requested that a group of shareholders, including myself, meet immediately before the ASM discuss a number of questions for the 2024 ASM, we intended to promote. The group agreed to hold fire due to Ms. Witten's input as the tenor of the questions could have been unhelpful due to the ongoing negotiations with an outside party. And in addition, we're assured by Ms. Witten that she would resign at the 2025 ASM and this has seen as being in the best interest of all shareholders. An important question for the independent directors committee set up under the -- to consider potential acquisition proposals has become even more relevant a year on. The company reported in its annual report, acquisition proposal costs of $2.2 million for 2024 and $2.3 million for the following year. That's $4.5-odd million, which is quite a lot of money to straggling shareholders like myself. Binding indicative offers, they were for binding indicative office. For those unaware, one of the key differences between an NBIO and an offer made under the Takeovers Code is that there is no provision for cost reimbursement of expenses incurred by the recipient of an NBIO. However, directors should have been aware of the generally agreed practice for directors to negotiate cost reimbursement of an NBIO. Now the question, can Ms. Witten confirm that the independent directors did not negotiate cost reimbursement for any of the nonbuying indicative offers, and we don't know how many had and that they agreed at the time that this action was in the best interest of the company?

I guess you're putting that question to me, Mike, and a bit of commentary in there, too. One comment about my intended retirement, today was supposed to be my retirement day but we were facing breaching NZX listing rules by not having 2 independent directors on the board that would have had impact on our company's insurances, on our banking arrangements. So I've agreed to stay on temporarily to help build the new Board back up. And at the same time, we needed to appoint a second independent director or we would still be in breach. I'm also going to chair the Risk and Audit Committee, which is another requirement of the listing rules. So you're welcome, Mike. In terms of the costs, I think we have talked about this a number of times before, and you rightly say that there was -- there was a time in the NBIO process when it has agreed that there is a point when you actually sign an agreement. So it is agreement, not just an offer. At that point, a normal practice to negotiate the costs. And I think that's what you were saying. And that is...

[indiscernible]

Yes. I understand what you're saying. So you're saying that just -- I'll repeat it because he's not on a microphone, that the company should have or the directors should have negotiated cost reimbursement from the point that an offer was put to the company. It's actually not normal practice to do it then. And it's -- I understand that. I understand that. And these are very large U.S. companies that do require us to follow usual practice. The cost base, if you look at I don't know if you have any of you followed the recent Manoa takeover. I think both of those companies on -- this is just a New Zealand transaction. Both of those companies had costs in excess of $4 million each for our New Zealand negotiated take over. And we -- the cost that you're talking about in bold, I don't think I can say the number, but there were a number of interested parties. And as you know, those bidders withdrew and we've covered this quite extensively in the media and so that you can understand why those bids didn't go ahead. They were interested in us. We were interested in engaging with them. We negotiated with them. We got a long way down the track and it ended with the geopolitical issues and the risks that U.S. companies see with the oil the different customers, et cetera, that we have. So those things have been in play for a long time, and we've now worked it to time.

But do you agree that you should have tried to cover yourself before you proceed it with the negotiation?

I don't believe that's in the best interest of shareholders to make a better go away if we weren't to agree that. The best interest of shareholders is actually to negotiate.

If he was an interested bidder, why would he go away? Because you asked for reimbursement and cost in the event of a failure, especially a massive one like that was looking at us?

Because it's not normal practice for them either.

Normal? Why can't it be abnormal and look after shareholders.

I believe I've answered your question.

Do you have additional questions for any of the Board members? Yes. Right here in the middle. The mic there.

[ Winston Marsh ], shareholder. The [ sanction ] that in the Board, which has emerged is troubled many shareholders. And it seems very proud as to what lay behind it. now. In terms of the major minor shareholder. I have a question for Mr. [ Tseng ]. I hope I pronounced his name correctly. Please excuse if I have not. But you say that you are not -- we're not prepared to support the candidates of Mark Bregman and the 2 others and you were not clear as to why. Could you indicate whether you are opposed to independent directors? And if you are in support of independent directors, what reasons did you have against the 3 candidates that were put forward right.

My name is [ Roger Yao ]. I'm going to speak for Mr. Tseng on behalf of him regarding the questions you have. I think some of those questions that you asked are still quite sensitive at this time. So it's a boardroom issue. So I'm not sure if it's suitable for me to comment here. But as far as your first question, I'm not quite sure you said about unclear of , if you could please repeat that question. The first question, what do you mean unclear about our?

Well, looking any species of the reasons why is Mr. Jung was not prepared to support the candidates. And I'd point out that we have still 1 candidate standing if I can put it that way. And I think the shareholders should be entitled to know the reasons why he is not prepared to support even that one candidate, let alone the other 2 that the company has taken turned put forward initially.

Well, first of all, we believe in supporting Brent as the Chair. So I don't know if that answers part of your question. But as far as not supporting the 3 independents, we have some reasons, but we believe Brent has more suitable capability in terms of supporting as the Chair. So that's the reason.

Are you in support independent directors? That was the...

Yes. We are in support of qualified independent directors.

I don't know my mic's live but I'd love to comment as an independent director who's been on the board for just under 5 months. I've taken my responsibilities of looking after all shareholders, large and small, incredibly seriously. In that time, I've received feedback from both Siward and Brent Robinson about positive impact I was having in my time on the board. So I think shareholders and particularly smaller shareholders who aren't in this line group who are trying to affect board changes here need to be very clear that these Board changes have no substance in the performance of individual Board members. And I'll comment on my other2 independent colleagues, one of whom Dr. Lisbeth Jacobs announced her withdrawal with me and Dr. Mark Bregman here. Rakon will very much struggle to find better qualified commercial directors who understand the industry than those 2 candidates. So from where I'm sitting, it's very clear there's no performance basis to these changes, and there's no capability substance to these changes. This is entirely due to the fact that independent directors felt sometime in May that they were unable to support a request to directly appoint Brent Robinson as Chair of the Board. And we have good reasons for that. We can't elaborate on all those reasons. But we're confident that we've done the right professional thing in the circumstances. So I just want that to be very clear to all small shareholders in the room today.

Well, [ Lynn], let us go back to what Brent Robinson has said and would you agree or disagree with it when he says it needs to have a mix of people prepared to work together to advance the overall strategic direction of the company. and he has lost confidence in the current independent directors. Can you throw any further light on that? Because I am vexed as to...

As I've mentioned before, I am completely confident and I'd state my professional reputation on the fact there is no material misalignment around company strategy there are no serious disputes on our company performance. Independent directors have always appropriately factored in Brent's view. We're very respectful of brands legacy position in this company and the role that he has played in building up the technology of this company. But some of us are very focused on the fact that I think a lot of shareholders will be focused on, which is the ability of this company to continue to deliver world-leading tech has never translated into appropriate value for shareholders. And that's what some of your departing directors around the table here, we're very focused on trying to change and try to lean into. So it's purely -- this is purely about the chair decision, nothing else in my view. And any other hypothesis that it is, I think, is mischievous.

I would also add that I think that throughout my tenure and the other independents and all of us have been on the board, I came in October, so it's also not that long. I think we've had vigorous debate within the Board, which is the purpose of having diverse views in the Board. I don't think it's ever been something where we couldn't reach some consensus agreement or come to some overall agreement. Sometimes we didn't all agree with every decision we reached the right direction. So I would agree completely with what Jon said, which is everything was going along in the right direction until the chairmanship came up, became open because with the announcement that Lorraine made that she was going to retire. And at that point, I became a candidate. Brent wanted to be a candidate. Both were considered. We put a rigorous process in place, which I went through with external insights as well. Brent refused to participate in that process but still want it to be considered. He was still considered by a committee, which I did not participate in. And at the end, that committee concluded that I was the best candidate. And that's when all of this started to open up to take us out of the Board.

I thank both you gentlemen, for your candidness, I now have a further question for Mr. You. And that is, is having heard those 2 gentlemen and your knowledge of the performance of the Board in its discussions, is your reason really for not supporting these candidates being a favor called in by the Robinsons?

Thank you for the question. Mr. Jung Tseng would like to say that, no, the answer is no. It's not a favor. It's a professional decision. We know the industry quite well. And the 2 gentlemen there, I'm not saying that they're not fit, but we have our reasons making our decisions. Just as John earlier said, there are things that probably better not discuss here, but we want to answer your question. We feel that brand is the right fit for -- to lead this company. And the decision is not because Brent made any kind of influence on us. It's our decision. Thank you.

We have some questions down in the front here. On this side?

Thank you. I'm a small shareholder, [ Peter Jones ]. I'm in support of Brent, I'm in support of the current Board. All this mingling from behind me should stop the presentation has told the story, let the Board get on and fulfill the story and carry on and stop us nickeling from behind.

Thank you for your comment. We have a question here in the front.

I guess I'm curious to the previous question in terms of which Board should get on with it because I think that is the issue that we've got here. So Roger, you mentioned on behalf of James in that you didn't think it was right to be transparent about your reasons for not supporting the 3 directors. If we consider independence is a key factor for smaller shareholders who still own 60% of this company approximately. And if we consider board capability as a key driver in setting the governance culture at Rakon to create that future growth and leverage that strategic platform has been created. What are the directors and what capabilities does Brent have as an individual that in combination, Dr. Mark Bregman, Dr. Lisbeth Jacobs and Jon Raby, don't have? Why is Brent as an individual so much better than the 3 people who have got some incredible background experience and functional knowledge of the various sectors that Rakon is involved with?

Well, thank you. That's a lot of good questions. Let me first answer. I don't think I know Mark or Jon well enough, but we have been working with Brent for quite its long time, and he has been the expert in this industry. So I don't know how you want me to benchmark or compare for you. I don't think this is the right place. But Brent is the expert, and I think that's just a very given fact. And it is our professional opinion because we have been in the industry long enough yes.

But your professional opinion, you've just said it is based on extreme knowledge Brent, your extensive knowledge of branding is capabilities and no knowledge of the other 3. You've just said that.

They are -- they're not the expert in this industry.