Chen Golan: Good morning, everybody. We will wait another one or two minutes for the last people to join us, and then we will start the webinar. Good morning, everybody, and maybe good afternoon for those that will join us from Israel. Next Vision investor webinar for financial statement of Q3 2026. With me here is Michael Grosman, CEO of Next Vision, and Alex Lavie, the CFO of Next Vision. My name is Chen Golan. I am a co-founder and the active Chairman of Next Vision. First of all, I would like to thank you all for joining us, taking the time with us. We will go through the presentation. I will try to highlight the things that I think are important, and after that, we will leave some time for a Q&A. Q3 2026 demonstrates growth all over major matrix.
Chen Golan: We updated for the second time the target of revenue in 2026 for $355 million, meaning a 111% growth from 2025. Next Vision considers itself as an R&D company. We try to bring to the market every year between 2 to 3 new products, and usually those products will be a game changer in the market. Our customers are the Western system providers that buy Next Vision solution, and we have more than 300 Western systems solutions that bought and still buying Next Vision Stabilized Video Solution for aerial platform. We are working on the ability to assemble a high quantity of unit per month. We started 2026 with a capacity of 1,500 units.
Chen Golan: Right now, we are standing on a capacity of 4,000 units per month, and by the end of the year, we are going to get to a capacity of more than 5,000 units per month from this facility in Israel. Parallel to that, we are working on the ability to assemble outside of Israel, and we will talk about that later on. Next Vision order backlog stands on $209.3 million. That is a growth of 69% from last year's Q3, and even we have a little decrease from Q2. I will explain later on why we see that decrease and what is the reason for that. As I said before, we are working about the localization, having the ability to assemble outside of Israel in our market, the military market. Most of our customers will appreciate if they will have the option to buy from a local manufacturer.
Chen Golan: Once we understand that, we started to work on that in Europe. The next step, by the beginning of 2027, we will start to do that in the United States. Just to remind everybody, the Next Vision claim to fame is the ratio between size, weight, and performance. When you compare apple to apple, you will find that Next Vision solution will be cheaper than our competitor solution in a very high reliability. The reason for that is because of the technology that Next Vision is using. Here you can see Next Vision gimbals. When we sell our solution to our customers, it will be by selling them the gimbal itself with some accessories that will help them to do the mechanical integration very fast in a low price, and the TRIP.
Chen Golan: It is a small computer that enables them to plug and play the system for their system and use some other capabilities like AI, detectors, geolocation, and some other option that we provide them. in 2026, we announced three new products, the Raptor 3X, the Stinger, and the TRIP7. Adding to the Stinger, you might have saw in the previous slide that we add another camera to our cameras, the SWIFT. It is the same camera like the Stinger, but it actually enables our customers to fly in very high speeds. Once Next Vision is seeing that there is a hole or a place in the market that does not provide the best solution, we bring new products that will serve this problem.
Chen Golan: By bringing the Stinger and the SWIFT, we enable our customer to have the solution for the counter-UAS market, meaning flying in a very high speed with aerodynamic and very strong engines with our camera, and still having a very stabilized video solution for their systems. Next Vision positions itself in the market as the biggest and leading company in the market. We do that by four things. One, of course, is the technology. The second will be proven operational experience, and I believe you know that in every conflict in the globe, you might find Next Vision solution on the drones and UAVs being used by those forces. I think that it will be right to say that more than 10,000s of units are actually being sold and used in the last few years. The third point will be production capability to meet the market requirements.
Chen Golan: I would say that Next Vision today will be maybe the only company that can actually give a solution for the high demand that we see in the market. We do not see any other competitor that might approach those quantities. They are talking about small hundreds per month, and we are aiming to get to more than 5,000 units per month by the end of the year. Financial strengths, of course, that help us to deal with the huge problem that we see all over, not only in Next Vision market, all over in the supply chain. The only way to deal with that will be for those components that we might have more than one supplier, to make sure that we have two to five suppliers, and usually they will be in a different geographics.
Chen Golan: For those components that we do not have a second source, we will buy an inventory in between 6 to 12 months. The reason for that will be that if one of our supplier will have a problem, and it can be on a daily basis that the supplier will call you and tell you that he delayed the supply in 3 months, then we still continue to deliver to our customers, solving the problems, and make sure that our customers will not suffer from that. Regarding the market, we continue to see a huge demand in the market. Even after the Democrats won the last election, everybody asking us about the demand. We do not see any change right now.
Chen Golan: Everybody understands that the next war, and it does not matter if it will happen or not, there will be a massive huge of drone and UAVs on the lower surface of the sky. So everybody is still buying the systems of drone and UAVs. We see in the US the budget of autonomous system aiming to $55 billion. In Europe, we are talking about getting the aerospace and defense budget from maybe 1% of the GDP to 5% of the GDP in 2032. Adding for that, the loan that European relief to the Ukraine of EUR 90 billion helps to push the demand in Europe, and we see that, and we will talk about it later. I will add for that two more areas that I think that are very interesting and relevant for Next Vision. One, of course, is India.
Chen Golan: After the last conflict with Pakistan, we see change in the way they act and buy, and they started to purchase Next Vision solution. Another area of late bloomers, we say the Japanese, they did not started yet to have a local production of drone and UAVs, but they actually doubled twice their aerospace and defense budget, and I believe they will enter the market in 2027. Regarding a global presence of Next Vision, we see again Europe is leading, going up from 57% to 63%, and that is again because of the budgets and the loan that they got. US going down a little to 22%. US was the market that had the highest growth in the last quarters before this quarter.
Chen Golan: Still, we see a huge demand coming from there, and we think that we have a lot of work doing there and make sure that we will continue growing in the US. Israel 9.3%, and all the other world areas going from 4% to 6%. We see the demand growing all over the globe. Here you can see some of Next Vision customers in the US, BRINC, Anduril, and PDW. In Europe, Quantum Systems and Sky-Watch, and in Israel, UVision, IAI, Elbit Systems, and Aeronautics. Just to mention and to see the strongness of Next Vision when we are talking about small gimbals, all the Israeli companies have their own gimbal factories inside their companies, but still, when they are buying small gimbals for drone and UAVs, they are buying Next Vision solution. This slide, this slide speaks for itself.
Chen Golan: We see the growth all over, from the revenue, gross profit, operational income, and net income. Two things to mention. One is active customers. Active customers are customers that actually put an order in 2026 and Next Vision actually delivered them systems. We see a slight decrease of four companies, but we can call it cleaning the small customers that actually do not buy. We see the growing of the vectors of continue growing and buying from Next Vision, so we do not see any effective change in the active customers. Regarding the backlog, as I said before, we see a growth of 69% from the last year Q3, and a slight decrease from Q2 2026, and there is an explanation for that.
Chen Golan: The explanation is that in 2026, we actually tripled the capacity of cameras that we deliver to our customers, meaning from the beginning of 2026, we were in 1,500s, and now we are over 4,000 units per month, meaning delivering a lot of cameras from Next Vision outside. The timeline that we usually get, and you can look for that in the last few years, the big orders of 2027 start in November, December, and going up to January. So that is the reason why we see the decrease in the inventory of Q3 2026. We believe, and as you know, we speak with our customers, we talk with them about future orders, and we see where they are aiming. We believe that 2027 will be a very strong year, and we believe that we will start seeing those orders coming in the next few weeks.
Chen Golan: Here you can see the growth of Next Vision in the last few years. I will mention only the difference that we see in between 2025 and 2026. That was the change in between phase 1 and phase 2. Phase 1, everybody was buying what they thought they need to use, and phase 2 is where we start buying to build their arsenals. And building arsenals takes a lot of budget and time. So I believe that we will continue to see the growth in the market for at least a few years. As I said before, I believe that 2027 will be a very strong year, a high two digits growth that we expect to see. So we talked about building the operational foundation for the continue of the growth. We are in this building, in this facility, have already three floors.
Chen Golan: We just started to take another half floor and going from 5,000 square meters to 5,500 square meters. We talked about the increase in production capacity going by the end of the year to be at more than 500 units per month. Speaking about the inventory growth from $54 million to $92 million, that enable us to deal in a proper way with the problem that we see in the supply chain. And expansion of international presence, we talked about building our assembly lines outside of Israel. First it will be in Europe and then in the United States. Alex.
Alex Lavie: Thank you, Chen. Now let us go over a bit of our financial highlights for the period of nine months that ended on 30 September 2026. We are looking at $262 million of revenue, which is an increase of 117% in comparison to the nine months ended on 30 September 2025. Our gross profit margin is around 66.3%. Our operating profit sums up to $156 million, which is an increase of 112%. It is important to mention our operating cash flow, that it increased four times in comparison to the period of the previous nine months. Also, I would like to mention that our R&D expense, as you can see here, is around $5 million, but in our accounting policy, we are capitalizing part of our R&D expenses.
Alex Lavie: As Chen mentioned, we are in an important stage of developing new products, so we have more capitalized expenses during this period. Our gross R&D expenses are around $8 million. Now, if you want to take a look at the other slide, we present here the three quarters of 2026, one next to another. Here you can see that, first of all, our revenues went up to $106 million. It is the first time we went above the $100 million mark. Our gross profit actually increased to 66.7%, which is still within the expected range that we published. We can see that there is an improvement from Q2, which was 65%, to almost 67% during this period. This is mostly because of the product and customer mix. There were some changes during this quarter.
Alex Lavie: We also talked about the inventory replenishment that we always look to purchase more inventory at good prices to keep up with the inventory prices within these times. It is also important to mention that our productivity has increased significantly during Q3, as in Q2, we hired a lot of new employees, and we see in Q3, the productivity went up dramatically as those new employees worked. Productivity went up for those new hires. Regarding our operating profit, we can see that every quarter during 2026 improved from one quarter to another, and currently it is at around 68%. This is very important for us. This is a strategic view of us. We are always examining the operating profit, as it has to match our destination. Now, the expense structure, we are a lean company, so we know how to manage our expenses.
Alex Lavie: It is also important to mention the economical scale that we are enjoying during this time. Regarding the net profit, it decreased a little bit from Q2. This is mainly due to the tax expenses that we wrote down in Q3. This is important to understand that there is a certain gap between the financial statement, which is marked in USD, but the tax expenses themselves are calculated in the ILS, the Israeli shekel. This is affecting every quarter. It has some effect if the exchange rate went up or went down. This can increase our exchange expenses, and it might affect the taxes. For this quarter, we can see an increase, but it is also very dependent on the exchange rate of the end of each quarter. That leads us to $53 million of operating cash flow for this period.
Michael Grosman: Thank you, Alex. What are the key drivers for the long-term growth that Next Vision sees and anticipates? We are actively pursuing a strategic acquisition in order to increase the pace in which we are growing. We look for external growth while continuing our internal growth. We heavily invest in AI capabilities, which both serves to increase the competitiveness of our customers when they are using Next Vision products and also increase the stickiness of the customers to Next Vision products. We are actively expanding our manufacturing capabilities. They were expanded in Israel, where we started the year with 1,500 units assembled per month, and by the end of this year, our goal is 5,000 units per month.
Michael Grosman: It goes way beyond that, because we have already started using our facility in Europe to manufacture in Europe, and we do expect to see a growing manufacturing in the European facility through 2027. We are going to initiate a manufacturing facility in the States during 2027. As an R&D company, which continuously delivers innovation to the market through its R&D, we are constantly increasing the investment in the R&D, hiring additional talented people, and expand our offering and make it better over time. We actively expand the customer base, and we heavily invest in our customers. We do see, for example, that the concentration of customers is going down from quarter to quarter, where other customers are taking larger and larger share in the sales. Last but not least, reliability and availability.
Michael Grosman: The ability to provide a product to the customer which is bulletproof and address their need without downtime, it is a key and paramount request in our business, and we constantly focus on that in order to increase the reliability and availability of the products. We will turn now to Q&A, and I would refer to some of the questions that we are receiving about the backlog. It is most important to note that the backlog refers to the orders, to the open orders that we have as of 9 November, which means that it does not include all the orders and deliveries from beginning of Q4 till 9 November. Moreover, when you look at the deep and the down of the backlog compared to three months ago, then you find out that we have two topics in our market.
Michael Grosman: The first, the fact that we have significantly increased the capacity of the production enable us in Q3 to release large number of orders to our customers and supply to them. On the other hand, when you see the historical details of Next Vision, you see that when building the backlog for the next year, the key months are between November and January. This is what we actually see. On one hand, a much faster delivery in Q3. On the other hand, expectations based on discussion with customers and based on the history and the way our market behave, that between November and January, large portion of orders are being received and logged into the system and add to the backlog.
Chen Golan: M&A activity.
Michael Grosman: Yes. The next one, the next topic is about acquisition. The management of Next Vision is actively pursuing acquisition opportunities. This is the fourth month now that VP acquisition is actively working at Next Vision and looking for various companies to be acquired on a full board. It is important to note that Next Vision will only acquire the right and fitting company to Next Vision strategy. When you are dealing with acquisition, statistics is against you, because statistically, most acquisition are not successful. From this reason, we always stress, we will do the right approach to the best of our ability, and we would not go lightly on acquisition just because we have large amount of capabilities to finance acquisition. I do anticipate that in the coming time, we will see some results for the effort that we are putting into this process of acquisition. Yes.
Michael Grosman: Another topic is about competition. Next Vision success is phenomenal, and it is not one year, it is six years now. There are competitors in the market, and there will always be competition in the market. Nevertheless, when you look at Next Vision portfolio of product, you see that they are the best of class while offering great pricing and value to our customers. Because of that, and because we constantly maintain their advantage, and because the market is seeking these advantages and would like to have them, we are able to both maintain our leadership, our prices, our margins. This is very important to note. We are heavily manufacturing in running as fast as we can forward, bringing additional capabilities to the market in order to fuel this industry and give it the right tools and the advances that it is looking for.
Michael Grosman: This is what Next Vision is doing. Add to that the capability of Next Vision to assure deliveries to its customers based on the large inventory that Next Vision is holding and based on past performance. You can see why the big opportunities do go and select Next Vision to proceed, as we can supply. This cannot be taken lightly. When you look at how the supply chains do react and behave these days, you find out that inventory is paramount in order to go through this complex period of time where supply chain is quite erratic.
Chen Golan: There is a question regarding the growth of 2027 that we said the high dual digit growth. We are working and getting information from our customers and try to build the expectation of 2027. By the end of the year, usually we are doing that on 5 January or on 31 December, we will publish Next Vision expectation of 2027 growth, or let's say a target of the growth in 2027. You will have to wait and that we will process all the details that we get from the market and from our customers, and then we will publish all the numbers.
Michael Grosman: Another topic to expand is the margins. As you can see, the gross margin for Q3 has increased compared to Q2, 67% versus 65%. This is due to the steps of improvement that we are doing. In Q3, every employee manufactured more, and this contributes to the bottom line and to the margin. This is all in spite of the challenges that the supply chain is putting in front of Next Vision. The positioning of the company and the advantages of the product and the fact that we are pushing forward with the capabilities, they are the one that give us the advantages over our competitors and the competition in the market, and they are enabling us to maintain and even improve our margins. It's not only the gross margin, also the operational margin has improved. About the net margin and the net profit.
Michael Grosman: As you can see, the net profit is healthy, $60 million for the quarter. When you look at the margin, you see a slight drop, and Alex Lavie has referred to that. The fact that the income, the tax is being paid in accordance with revenue that is counted in ILS create a situation that when the dollar ratio to ILS goes up, then the asset, the value of the assets of Next Vision go up, and we need to pay additional tax because the tax is calculated according to the value in ILS. Naturally, if the conversion ratio between dollar to ILS will go down, we will pay less. So at Q3, we paid more, and this is what you actually see. This is the slight change. Once again, it changes in according to the change in the ratio between dollar and ILS.
Michael Grosman: There is a question about the concentr- related to the concentration of customers. To start, we see that the concentration is going down from 67% accounted to the three top customers to 60% accounted to the three top customers. When you look at the other customers behind the top, you see that some of them are gaining traction and are getting a larger and larger portions, meaning that we see a growth of customers ratio which are not at the top three, but also the others, meaning that we do expect that concentration, assuming that this is moving forward, will further go down. There is a question about, there are questions about North America.
Michael Grosman: The sales to North America over the first nine months of the year has grown from $31 million in 2025 to $51 million in 2026, which means that the sales to North America are growing. However, the pace of growth in sales in Europe is faster than the pace of growth of sales in North America. This is because there is an active conflict in Europe, which not only affects the demand for the conflict itself, but because of fear that the conflict will be expanded to other parts in Europe and better be ready to that. Part of being ready is getting ready with the small platforms. Another thing that was mentioned is the release of loans, meaning release of funds in order to be able and buy additional equipment for the current conflict.
Michael Grosman: All of that makes Europe pace of growth faster than North America when it comes to Next Vision. Yes.
Chen Golan: Very good.
Michael Grosman: Yes. There is a question about the cooled cameras. We have done extensive work to grow up the cooled offering of Next Vision. We now feel that we are on a solid state. We already started actively marketing the changes and the improvement, and we actively market them, we do expect that we will see the cooled cameras taking a larger portion in the sales of Next Vision. It took us time because growing a new technology always takes time, but finally, we feel that we have reached our target. That's it.
Chen Golan: See what is going.
Michael Grosman: Okay.
Chen Golan: Okay.
Michael Grosman: Well, thank you, everyone. We will conclude here the Q&A session. Naturally, we are open to questions, and you can access us through the PR links, and we will be happy to share with you additional information about Next Vision. Looking forward to continue the growth and the success of the company. Thank you.
Chen Golan: Thank you very much. Thank you.
Operator: Goodbye.
