In the midst of a debt dispute with a major lender, Australian security technology company Electro Optic Systems (ASX: EOS), which operates in the defence and space sectors, has announced a robust revenue projection for the calendar year 2023. The Company anticipates its revenue to range between $210 million and $230 million for CY23.
This comes as the Company reported total customer receipts of $220 million for the nine months to September 30, 2023, up from PCP’s $103.9 million.
Throughout 2023, Electro Optic Systems has actively expanded its product portfolio and customer base while optimising the delivery of existing contracts. Aware of various sell-side analysts’ revenue forecasts for the year for EOS, the Company decided to put speculations to rest and provide its projections.
Notably, the Company reported higher-than-expected revenue in October, and subsequent analysis indicates a likelihood of surpassing initial revenue projections for November and December 2023.
Key contributors to this positive outlook include ongoing work under a multi-year contract with a significant Middle Eastern customer, witnessing accelerated milestone achievements, and continuous efforts by EM Solutions in delivering contracts, such as the new SEA 1442-5 agreement with the Royal Australian Navy valued at up to $202 million.
Electro Optic Systems operates in two distinct divisions: First, defence systems, where it specialises in technology for weapon systems optimisation and integration, as well as Intelligence, Surveillance, and Reconnaissance (ISR) and C4 systems for land warfare. Second is space systems, which includes all space and communications businesses operating as Space Technologies and EM Solutions. In 2023, the Company shipped items to Ukraine and received more orders for its defence and space tech.
At the same time, Electro Optic Systems has been facing a debt dispute with Washington H. Soul Pattinson (WHSP) since October. EOS received a $4.5 million fee claim from its primary lender, WHSP, on October 9, 2023. Subsequent discussions led to an agreement with WHSP not to pursue collection until December 8, 2023, as EOS disputes the claim.
Amid the ongoing WHSP dispute, Electro Optic Systems secured a new contract worth approximately $28 million in November to supply a customer in Southeast Asia. The Company will provide R600 Remote Weapon System (RWS) unit spares between 2024 and 2026 as part of this agreement.
The positive revenue momentum experienced in October and November 2023, coupled with an improved outlook for December, positions Electro Optic Systems to exceed its previous expectations for Q4 CY23. The Company is bolstered by the sale of its Remote Weapon Systems (RWS) products to a major customer in Western Europe, with a total contract value of $52.7 million.
As of Q3 CY23, the Company’s cash balance was $46.1 million. Its dispute resolution with WHSP will further reveal where it stands monetarily, although the impact might not be too significant.
Alinda is a Business Reporter for The Sentiment
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