EOS Debt-Free After WHSP Loan Repayment Amid Contract Backlog Growth

Record Order and Backlog Growth

Electro Optic Systems Holdings Limited (ASX, EOS) has reported a landmark quarter, highlighted by a €31 million (approximately A$53 million) order from a Western European government for its flagship Slinger Counter-Drone Remote Weapon System (RWS). This deal not only marks the largest order for the Slinger system to date but also represents EOS's biggest naval RWS contract ever. The systems are scheduled for delivery across 2025 and 2026, addressing urgent operational needs in Europe.

Alongside this, EOS's contract backlog expanded by 25% to $170 million as of June 30, 2025, underscoring the company's growing footprint in the defence sector. This backlog growth is a critical metric, reflecting both secured revenue streams and the company’s success in winning new business.

Robust Financial Position and Cash Flow

EOS reported a net operating cash inflow of $30.5 million for the quarter, a significant turnaround from the $39.7 million outflow in the previous quarter. Total cash holdings, including term deposits, rose to $130.3 million, bolstered by a $60 million receipt linked to a finalized Middle East contract. This strong cash position is complemented by the complete repayment of all borrowings from Washington H. Soul Pattinson (WHSP) facilities drawn in 2022, leaving EOS debt-free and financially flexible.

The company also maintains $51.9 million in cash security deposits supporting bank guarantees and bonds, reflecting prudent financial management amid ongoing contract obligations.

Ongoing Manufacturing and New Contracts

Manufacturing efforts continue apace, with production underway for counter-drone container-based RWS and naval Slinger systems destined for Western European customers. EOS also secured a $5.8 million Australian government contract post-quarter to collaborate on space systems research, alongside a €3 million order for precision optical equipment from its KiwiStar Optics division.

Advanced negotiations are progressing on several high-value opportunities, including the Land 400 Phase 3 RWS contract in Australia, valued between $80 million and $100 million, targeted for signing within 2025. Additionally, EOS is in talks for two potential high-energy laser weapon contracts, each potentially worth around $100 million, with expected signings in 2025 and 2026.

Strategic Partnerships and Market Expansion

EOS is actively expanding its market reach through strategic partnerships and demonstrations. Notably, it signed Memoranda of Understanding with UK-based MSI Defence Systems and an Adani Group subsidiary in India, aiming to leverage complementary strengths and promote EOS technologies in new markets. The company also showcased its R400 and R800 RWS at Northrop Grumman’s Bushmaster User Conference in the US and participated in major defence exhibitions in Japan and Indonesia.

Further, EOS is advancing offset obligations in the Middle East through a planned joint venture with Shielders Advanced Industries to locally manufacture the R150 Remote Weapon System, aligning with contractual economic development commitments.

Outlook and Revenue Expectations

EOS expects first-half 2025 revenue to be in the range of $40 to $45 million, including $12 million of previously constrained revenue recognized following contract finalization. The company anticipates a revenue skew towards the second half of the year, driven by contract backlog execution and new contract signings. While revenue timing remains inherently lumpy due to the nature of defence contracts and milestone-based recognition, EOS’s focus remains on growing its contract backlog and converting advanced negotiations into binding agreements.