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ELSIGHT LTD (ELS) - Geopolitics & Growth: Elsights Impact on Drone Technologies & AI Innovation

• Andrew Musgrave

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The landscape of connectivity is rapidly evolving, particularly within the domains of defence and unmanned systems. In this episode, we gain valuable insights from Yoav Amitai, the CEO of Elsight Limited, a trailblazer in AI-powered connectivity solutions. As Elsight embarks on a phenomenal journey of transformation, we explore the company's flagship product, Halo, which has significantly enhanced drone operations by leveraging advanced multi-link bonding technologies. 

A staggering 32% increase in annual revenue evidences Elsight's strategic pivot towards defence, where demand for reliable communication is at an all-time high. As geopolitical tensions escalate, we discuss how Elsight is navigating these waters with meaningful partnerships with renowned contractors like Lockheed Martin, ensuring sustainable success through their innovative design-win strategy. The episode also delves into key product developments, such as DroneCommX, an aftermarket solution tailored for DJI drones, aimed to strengthen security protocols amid growing concerns over data protection.


Andrew Musgrave Host

Welcome to another episode of ASX Briefs, and today we welcome back Yoav Amitai, the CEO of Elsight Limited, a leading provider of AI-powered carrier-agnostic connectivity solutions. Elsights flagship product, Halo, has been transforming how drones and unmanned systems operate by delivering unparalleled connectivity through AI-based multi-link bonding. Over the past year, Elsight has seen impressive growth, with a 32% increase in annual revenue, a major shift towards the defense sector and notable achievement, such as new design win customers. Yoav, thanks for joining me again and welcome back to the ASX Proofs podcast. 

Yoav Amitai Guest

Hey, Andrew, always great to be here. Thank you for having me to the ASX Briefs podcast. 

Andrew Musgrave Host

Okay, let's just touch on 2024. So, the company reported a 32% increase in annual revenue for the year, with a significant shift towards the defence sector Now 51% of total revenue, up from 37% in 2023. So, what were the key drivers behind this growth? 

Yoav Amitai Guest

So, looking on the news today, on the global news today, if you're seeing what is going on in the geopolitical world, I will call it, we're seeing that there is kind of an arm race, global arm race, and today, knowing what Elsight is doing, providing highly reliable communication systems, mainly for uncrewed systems, which include drones, ground robotics, maritime robotics sometimes and we're seeing a big trend happening currently again globally in the Western world of a lot of government going after those type of solutions because they want to save people life, they want to make sure that the economic makes sense, it's more economical, and so on, and we had this kind of a perfect storm in an unfortunate circumstances, but I'm kind of an, the perfect storm around us being part of this industry in the commercial side and then pulled into the home and security defence markets of this. So that was one of the key drivers. In addition to that, we're constantly continuing developing our product and our solutions to provide better features, better capabilities to our partners. So, it's a combination of existing customer growth as well as new customers on board working in new regions, new use cases and so on. But those were the main key factors. 

Andrew Musgrave Host

Now can you elaborate on your new partnerships and major contracts, particularly the new design-win customers and deals with major defence contractors like Lockheed Martin? 

Yoav Amitai Guest

Yeah. So, our all go-to-market approach strategy is about design-win. Design-win is a phrase that was given by to the world by Intel in the 70s and they said every PC manufacturer with Intel chipset inside, it's a design-win because as long as they manufacturing this model, they will have the Intel chipset inside. And we took the same approach, saying every OEM, every system manufacturer or system integrator that will base their system on our solution will become a design-win because they're doing all the integration efforts, they're doing a lot of regulation effort, a lot of working to make sure that the system works smoothly, which means that as long as they manufacture the model that we are installing to, we will continue to benefit from that because anytime they ship a drone or a robot out, we will be part of the bill of material so that's our all go-to-market strategy. 

This year, in 2024, we were fortunate to announce to the market some very significant new partners, like Lockheed Martin that you mentioned. 

I assume everyone knows Lockheed Martin being the largest defence contractor in the world today. Not only that, we also added their ST Engineering, for example, from Singapore Lock Safety. It's a public safety company, the second largest public safety company actually in the US, and the list goes on and on. We are adding in a pretty steady pace, new onboarding, new customer, new design to be part of our ecosystem, which shows again the product validation or the product market fit we have in this market. And it's another good signal, I think, for both investors and those that are following the business to look on this key factor, saying as they onboard, as they being Elsight onboard, or we onboard new design, new customers, it shows the potential growth and the future growth of the business and this is also why we're putting it as part of the highlight for the yearly report, because it's not just a new customer that will buy one time and go away. It's kind of a long-term relationship we have with those design-win customers. 

Andrew Musgrave Host

And the company has been investing in new product development, including an evolution of the Halo system. So, can you share more about these innovations and what they mean for future growth? 

Yoav Amitai Guest

Sure. So, as a technical company, as a tech company, we constantly need to invest in our technology. I think that in today's world, everyone sees how AI, for example, is changing the way and how fast it's iterating, how fast we see more and more versions going out. The reason being is because there is a constant competition of who will be in the forefront and what will be the best solution available in the market, and it's not only for consumer-based type of product, it's for any product. And, as a tech company, like I said, we need to constantly make sure, even though we work on the design and concept I mentioned before, we need to make sure that we provide our customers, our partners, with the best solution that they can find available in the market, and that's why we're constantly developing these features. 

In terms of how it affects the future growth that you asked, so Elsight have multiple growth engines. One of them is making sure that those design that we mentioned before have more and more features they're utilizing or using, and by that we are increasing what's called in the industry the ARPU average revenue per unit and this is another way for us to increase the recurrent revenue, or the one-time revenue that we're doing this year. We have developed the heat site, which is a new platform to be able to kind of map the signals from different infrastructure that you have around you and many more features. This is one that was a big development for us, and we have some interesting initiatives around it. But that's what we're doing. I mean we will constantly, I can assure that we will constantly continue to develop and to invest into research and development in our product

Andrew Musgrave Host

And you recently launched DroneComX, an aftermarket upgrade for the DJI Matrice 30 and 350 drones designed to enhance BVLOS capabilities for law enforcement and security applications. So how has the market response been so far? 

Yoav Amitai Guest

So first of all, BVLOS stands for Beyond Visual Line of Sight, which is the main segment within drones working whether in more sophisticated mission or literally beyond visual line of sight. And DJI, for those who don't know, are by far the largest company in the world manufacturing drone based out of China. Today they own something between 85 to 92 or 95% of market share in the drone industry in general, so they are much larger than anyone else and them coming from China and all the different sensitivities I would say that we have today in the geopolitical world. They've been banned in many countries for government use, which include Australia, US, some countries in Europe and so on. So, we understand that there might be an opportunity there for us again dealing with highly reliable communication, and we created an aftermarket kit developed solely by us, not in a corporation with DJI, but we just develop it internally, which is an aftermarket kit for the more commercial drone or more professional drone, sorry which are not the hobby of small ones. That is kind of an aftermarket kit. You attach the drone from the top, you connect one cable and then you work with our communication system instead of working with the DJI communication, which provide more confidence to the customers that they know what's going on with the data, they know that the data is protected, they have it in their own data centers and so on. 

In terms of business traction, we launched it in the end of 2024. And beginning 2025, we already have first orders. We actually overachieved our target for the first quarter in terms of, specifically, DJI DCX sorry sales, which was very interesting for us having this traction. It's still only in the nascent steps and it's kind of a I want to say crawl or run, but definitely walk, run type of scenario and we're in the walk phase and we're working to accelerate that. But yeah, it's very interesting development and very interesting business development as well.

Andrew Musgrave Host

Okay, and just at a more of a macro level, you touched on the conflicts going on around the world at the moment. So how do you see the geopolitical trends impacting demand for Elsights technology? 

Yoav Amitai Guest

Like I said before, for me to be honest it's unfortunate and we're seeing in the future that the commercial market to change the way we get our groceries, the way we're doing delivery, the way we're doing inspection and private security. 

That's how drones will change the world but today we’re seeing a big trend in the entire drone and manned ecosystem in general. Looking in the military industrial complex and that's the trend we're seeing and I would say that it's kind of an arm race that will remain at least for the next 18, 24 months, even if we'll have a peace deal globally because of countries today, because of what happened in the last two years, two and a half years globally, even three years, and I think that today countries are more threatened and seeing this threat and understanding that the threat might one day take action and then they act on it and making sure they have the tools to protect themselves against that. So, I do think that even if we will see some deal, hopefully, even when we're seeing some peace deal globally or some ceasefires, we will see the continuous of this kind of governments equip themselves with whatever they need in the next two years for at least, if not five years. But that's definitely the trend we're seeing In Elsight. Our estimation looking forward is that the vast majority of the revenue in 2025 and 2026 will come from the defence market. 

Andrew Musgrave Host

And you've signed a new distribution deal with Tukom, a defence-focused distributor. So what does this mean for Elsights European market penetration? 

Yoav Amitai Guest

So, looking on the markets that the most or currently have the biggest change Europe, obviously, because of the Ukraine-Russia conflict and everything happening there, we're seeing that European countries are doubling their defence spend, again because of what I said before, which include Poland, Sweden, Germany, the Nordics, all those different countries. 

They're literally doubling their defence and talking a lot about crude and for us, looking for a partner that is in the market, know the market, have the experience, have the connection and so on, that was the no-brainer let's call it type of business, go-to-market approach and that's what we have done. Tukom are a super interesting partner for us. They are very strong within the European defence market, selling products that are parallel or adjacent to our solution, which can be complementary to existing customers that already have. So, it's kind of a very interesting match we have there. We already had two different conferences that we have done together, with some great leads coming in and we're now nurturing those leads. So, we are starting to see some traction there and obviously looking to 2025 to start to see meaningful business coming from this direction. 

Andrew Musgrave Host

Okay, and just to wrap things up, looking ahead, what are some of the key milestone’s investors can look forward to in 2025? 

Yoav Amitai Guest

So, as we put on the annual report that just went out last week, I would say that, looking on our current pipeline and the opportunity we're seeing in front of us I also said it on an investor webinar a couple of weeks ago we never saw this level of pipeline and we're sure that 2025 will be the year for us to execute on this pipeline and even accelerate the growth that we have last year to be uh, to be even  greater and even bigger. Um again, some might look at that as unfortunate circumstances, but it is business and we're trying to make sure that we are in the right side, and you know that's how we work basically. So, I think this is going to be a very interesting year for Elsight in 2025. And you know, I invite everyone to follow us. We're doing a lot of investors webinar, trying to put out a lot of newsletters to update what's going on in the market, partner progress, our progress and so on. So, I'm happy to have new followers. 

Andrew Musgrave Host

All right, Yoav. Well, it's been great to catch up again to get an update on the company, and we look forward to further updates in the upcoming months. 

Yoav Amitai Guest

Thank you very much for having me, Andrew. Great to be here. 

Andrew Musgrave Host

That concludes this episode of ASX Briefs. Don't forget to subscribe and we look forward to catching you on our next episode.