This article first appeared on GuruFocus.

Release Date: February 23, 2026

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Etherstack PLC (ASX:ESK) reported a 70% increase in total revenue for FY25, marking a record year with over $10 million in revenue. The company secured two major contracts: a $20 million deal with AT&T FirstNet in the US and a 14 million contract with the UK Home Office, both of which are strategically significant. Etherstack PLC (ASX:ESK) has expanded its global workforce from 48 to 64 employees, indicating growth and increased operational capacity. The company has a strong partnership with Samsung, contributing to its strategic positioning in the mission-critical communications market. Etherstack PLC (ASX:ESK) achieved positive operating cash flow for the eighth consecutive year, demonstrating financial stability and effective cash management.

Negative Points

Despite the revenue growth, Etherstack PLC (ASX:ESK) reported a modest loss of $700,000 for the year. The company experienced a weak FY24, which impacted its financial performance in the previous year. There are significant costs associated with scaling operations, including the establishment of new security and support centers in the UK and US. The exclusivity terms with Samsung have fallen away, which may impact future contract negotiations. Etherstack PLC (ASX:ESK) currently has negative retained earnings, delaying potential dividend payouts to shareholders.

Q & A Highlights

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Q: As you grow your support/cash revenues, how high should we expect margins to go? Are they purely variable, depending on product mix, or will they increase as recurring revenues become a greater proportion of total? A: As recurring revenues grow, we need a fixed support base globally to maintain 24/7 support. Historically, gross margins have reached the upper 60s. We expect growth over 50%, into the 60% range, despite some drag from establishing new operations centers in the UK and US. Once these are in place, we anticipate further growth in gross margins. - CEO David Deakin

Q: Outside of Australia, how many other countries/cities are performing trials on MCX interworking function capability? A: Globally, almost all developed nations are preparing for pilots or procurements in the next 2-5 years. This year, there are likely 6 to 12 pilots worldwide. We are involved in several pursuits with major vendors and governments. - CEO David Deakin

Story Continues

Q: How is 2026 looking in terms of executing new contracts? Are negotiations underway with any potential new clients, and is the focus still on the US and UK? A: The US and UK deals are secured for 5 to 7 years and will significantly contribute to revenues. For 2026 and beyond, these deals are foundational. New contracts require substantial investment and time, but we are confident in our guidance based on these anchor contracts. - CEO David Deakin

Q: Regarding the Samsung agreement, due for renewal, do you expect to renew on different terms or just extend the existing? A: The exclusivity terms have lapsed, but Samsung remains a great partner. We expect to continue working together globally, either as a subcontractor or partner contractor, focusing on delivering to the public safety community. - CEO David Deakin

Q: Who are your major competitors, and what are Etherstack's competitive advantages? A: In the high-growth interworking business, we believe we are ahead in new technology. Winning the top two global deals supports this. The technical, organizational, and logistical barriers are high, and our 20-year industry presence gives us a competitive edge. - CEO David Deakin

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

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