Cyanconnode Holdings (LSE:CYAN) — Full Year Results

0:02 Good morning, and welcome to the CYANCONNODE Holdings PLC Full Year Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company will review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I would like to submit the following poll.

0:33 And I would now like to hand you over to Chairman, John Cronin. Good morning to you. Good morning, Alex, and good morning, everybody. Really good to engage and and talk directly with shareholders of CYANCONNODE. And we'll go through the presentation, myself and Heather. And then at the end of it, we do have some pre questions that were sent in. So we'll go through those, and then we'll answer any other questions that come through during this presentation. So just to remind everybody, I thought we'd just do a few slides just to especially for new investors that perhaps haven't seen or heard, some of these slides. There's only a few that I'm going to do just about the company, and then we'll swiftly get into results and where we are right now with the company for its growth going forward.

1:21 Just on this slide, this we have to say this to everybody that we can't give any forward looking statements as we're on the stock exchange. As you know, everything is published to everybody, and that's how we have to do that at at the same time with any share moving information. So just to remind everybody who we are and what we do. So we are in the Internet of Things. We supply smart communications networks focused on RF mesh and some cellular within the platform. And it's a fairly secure platform that we offer, and it's under a standard what we call IPV six, six low pan, an international standard that we have. And we do have and go through blue chip companies to the end customer.

2:08 And the good thing about our product, we are agnostic, meaning that we can connect any device, any meter in the world to our platform. We are now having stringent SLAs, which are service level agreements with our customers to ensure the performance is met through the scalability of the product and, in fact, the throughput of data from the consumers to our platform and through to the billing system of the utility. And what we how we differ from cellular, we are a very secure private network as opposed to cellular, as we all know, as a public network. As an example, when you come out of a rugby match, cricket match, football match, you try and use your mobile phone, at times, that's blocked and you can't make the call.

2:54 We ensure that our private network really is dimensioned for the capacity getting through with all of that data all of the time. Again, just a simple drawing just to explain how how it works. On the left hand side, you can see devices, meters in homes. And what we then do is we put a a module into the meter when it's been, at manufacturer stage, and that meter goes from being a dumb meter to a smart meter with the module inside it, a bit like a SIM, just a bit bigger than a SIM card that we all use in our mobile phones. We then have a gateway or a data concentrator unit that actually collects all the data from 250 homes, and those gateways sit either on the lamppost or the side of a building.

3:45 Once that data reaches there, we then what we call backhaul it either over fiber or over mobile. In the main, it's over mobile networks. And then what we do, we get the data through to our head end system, which is some software that sits in the data center and the billing system of the utility. So you sat in a call center there, you can see end to end exactly how much data every every fifteen minutes we send data through. And you can see time of day usage, net net when people put from solar panels energy back into the grid. We can work all that out through them. We give that data going through to the utility. So if you look on the left hand side, what that is depicting, that's what we call sort of, the grid is it it's like a forming forms a mesh. But, basically, you can see all the parameters.

4:40 And on the outside of that circle, you that equates to 100% achievement. You can see the red elements within the circle. And what we have there, that shows RF mesh, and then cellular is the purple one inside that. Then power line communications is the smaller one inside that yet again. So you can see that RF mesh performs better in a lot of areas than cellular does. So what we see going forward for where there's large deployments, especially in the likes of India, where they are going to order within the next number of years, 250,000,000 units, we see a combination of RF mesh and cellular. And in some networks, you'll have both communications in the one in the one network.

5:32 Just moving on to the next slide. So this then, just on the right hand side, gives some, actually, USPs really as to what we get with RF mesh. I mean, we're low power. The power is less than a mobile phone. We also have self forming self healing, which actually means if part of the network goes down, it looks for an alternative route to get the data through. Whereas if you've got cellular, cellular is what we call point to point. Mesh, RF mesh is point to multipoint, and that's why we can offer the performance of 99.5%, which is really important. The bandwidth that we use called ISM band is the same band that everybody would use to open up electric gauge, garage doors, etcetera. So it's every bit everywhere, and it's license free, which is another USP as well.

6:23 So now just coming on to looking a bit more closer as to to where we are today, and then we'll get into some of the results. What we as you say, we're a large global player now in wireless communications globally. And today, we've got 2,700,000 endpoints that we've deployed in the marketplace. We've actually deployed just over 1,300,000 of those in India. And if you think today, we have something like in India, 25% of the installed base. And we've got a win rate of tenders right now of about 33%. It's a fairly, highly scalable, product as we call it, OmniMesh, and it's an end to end platform that we we offer from the home, as I say, all the way through to the billing system. If you just look at India alone for a minute, and as you know, we operate other places like The UK, also in India, Thailand, The Middle East, and we are looking at places like Malaysia, Indonesia as well. But just on India, you know, if you look at just for CYANCONNODE's part of 250,000,000 and if they took all the communications, that's a market addressable market as we call it a $3,000,000,000.

7:38 And we're actually involved right now out there that are over 200,000,000 meters in various stages in different tenders. So as I mentioned just we said I said that we're getting about 25% of the install base. Well, we do have 25% of the install base, 33% of winning

7:56 on on success and tenders. So even if we we peso mixed it, and this is just for illustrative purposes, even if we just add 15% to the market, you can see the amount of revenue we'll get from India, 3 to $500,000,000 worth. So imagine if we got 25%, then you can double that to, you know, 1,000,000,000. So there's a huge amount of, revenue and a huge amount of market to play for, and that's what we're focused on. What we are doing right now is looking at investment in our people and growing the company immensely. And, you know, we've got nearly something like a 150 people in the company. A lot of that now is in India. I mean, if you go back, sort of, twelve months or so, we're we're about 60 people across the company because of what's happening in the scale that's needed in the operations, especially in India, where today we've got about 130 people or so in India, maybe a little bit more now still, recruiting.

8:56 And then the rest is in in is in The UK. Not only are we looking at that, but we're also looking at our platform to enhance the platform going forward with different standards. Some of you may see some notices that were put out earlier in the year about the WISON standard where we're working with Silicon Labs. That's a $6,000,000,000 company that provides silicon to us from The USA. And they've coming up with a new standard called WISON, which we're working on the platform. Our engineers, the software engineers now are working on it and developing it, enhancing it. And, also, we're looking at what we call unified HEZ as well. We're developing that. That unified HEZ will allow not only electricity, but gas, water, EV chargers, streetlights to be on the same platform.

9:44 And not only that, we then would allow on a unified, yes, third party communications that come onto the platform. So third party cellular, so we could hook up, you know, Vodafone, e e, etcetera, onto the platform. And it's all in one head end system, one one platform, one system. And, also, we get in we could get into other verticals, but that's what we're developing more for the future. But just to give you an eye idea of where some of the investment is going as well as the investment that we've invested in silicon in advance and also other products, to ensure that we have the products ready to deploy. Heather, do you want to talk about this slide, please? Yes. Now this this is actually John mentioned on the previous slide that there's more than 200,000,000 meters that are actually sanctioned, you know, for tender. So this this is really either out for tender at the moment or they've been approved for tender.

10:39 And this this document is actually, as you can see, it's it's as of the July 14. So a very recent document, and it's a public document that that we found that gives a full update on where things are. What we've done is we've just added on the side against each of these particular sort of states and utilities where we've had orders in the past. Now they're not all the orders that we've had in the past are not all under the RDSS scheme, which is the latest scheme. Just as a reminder, the RDSS scheme, that's the revamped distribution sector scheme, which is the one that was approved about a year ago, And it's one that's really governed by the standard bidding document that sets out all the terms that all the contracts will need to go under. It sets out the processes for the bidding and the timelines for the actual deployment of the contracts.

11:32 Now you can see so under the RDSS, there's over 200,000,000. There's 205,000,000 that are sanctioned. With other schemes, some of these are schemes that have happened in the past. It's a total of nearly 230,000,000 meters that are sanctioned in total. And then there's under RDSS, there's about 43,500,000 that have been awarded. Now when we talk about awarded here, we don't mean awarded all the way down to the end customer such as ourselves. These are awarded to the prime bidders. And under this process that's required under the RDSS scheme, the the process that's followed is that the the tenders get awarded to the prime bidder. They are required to have a a special purpose vehicle set up to and and then they're required to have the the the funding that will sort of cover the whole project. And all of that is is required to be set up once they've had the the contract awarded to them.

12:29 So that can take a few months. And

12:31 after that, once all of that is set up, then they will start the negotiation with, you know, the the partners such as the meter manufacturers, the, you know, the system integrators if required, the communication providers such as ourselves, the meter data management system providers, and all of those. So there'll be a period between when these are awarded to the prime bidders to working their way down to the end, you know, partner. Now what what I find really interesting is this installed column. The installed column, you can see, it's a total out of all of these that have been awarded. It's a total that including other schemes that's been installed of 6,700,000.

13:17 Under RDSS, it's it's 1,780,000. Now what I find interesting under that is that actually those three states that are seeing deployments actually happening, we're in all of those states. Now Madhya Pradesh one was one of our very first contracts going back to 2018. So we've installed you know, we we've had previous contracts for about 500,000. We've installed, I would say, three, four hundred thousand in Madhya Pradesh in in contracts previously. And then one of the contracts that we won in January this year was for another million in Madhya Pradesh. We you know, I've I've sort of depicted here so you can see which of our contracts were under RDSS. The one under the Madhya Pradesh state is obviously a combination, as I said, a combination of RDSS and and other. But it's good to see that actually we're in the states that are deploying.

14:11 Thanks, Heather. So so this this one really just depicts the length and breadth of the the utilities that we're working in in India, and you can see that there's an awful lot these days. And what we what we are doing, part of our strategy and you may have seen an announcement where we got an order for 600,000 units from one of our partners, Intellismart, earlier in the year. And, really, we use that with with the strategic agreement we got that comes out of the 2,000,000 units that we signed with them and which we announced. It's it's a call off contract. And that 600 then is like a beachhead. And what we do, we put a flag in the ground in that new utility. And what we want to do is have several beachheads. And so we we may say out of that 2,000,000 then, which now is 2,400,000 left at the 3,000,000, we'll actually maybe get 300,000,400,000.

15:01 We can go to different utilities, put our flag there as a beachhead, and then we can roll start rolling out there as a first provider of communication services and then do it well. And, hopefully, then we'll get the the rest from that utility. So that's a sort of strategy When you see us putting out numbers like 600,000, then you say, well, why aren't you putting out, you know, 10,000,000 or something? You know?

15:27 You know, they just don't do it that way. They will, you know, place orders on quantity. As you know, we got, you know, several mil a couple of million this year in the last twelve months. I mean, it's taken us what took us ten years to get 1,300,000 units. And, actually, then we've grown that to 4,200,000, the majority of that coming in the last twelve months. So you can see things have changed quite rapidly. You know, they also want to make sure and ensure that we're around for ten years. So I said, well, at 1,300,000 units, we've been around for ten years. So having 2,900,000, you know, it was a lot more. And, obviously, we we'll be around for ten years plus because these contracts are ten years in length. And that's great because it's reoccurring revenue that we get because some of it is paid up front to us. But then another part of the contract is on equal monthly installments per meter per month for an another eight years after the installation of two years.

16:24 Now, obviously, how we go to part to to our end customers to the utilities is through partners. So just to explain this slide, at the bottom are the meter manufacturers that we work with. And as I say, we're working with those meter manufacturers. Originally, we had meter manufacturers in India, only three, and those are the top three that we have, which were Schneider, Genus, HPL, who have more than 50% of the static market. And now what we're doing is actually we're integrating with 10 meter manufacturers.

16:56 And if you think each meter manufacturer has three different meter types, they have a single phase, a three phase, and a poly. And that means for 10, you that's like doing 30 meter integration. So you can, you know, see that we're quite busy in doing that. So those are, the meter manufacturers, and some of them will become prime bidders in the as known as AMI service providers where they get the money funded for the next ten years. You can then see in the middle, we have system integrators. And, also, there's a new term called EPCs. EPC stands for engineering procurement construction companies. These are fairly large companies that build motorways and they build airports, for instance. So big infrastructure funds such as on here, NCC is one. Intellismart is another one. Alfa Nara is another.

17:48 Then we we've got, the likes of Monte Carlo. So all all of these are what we call EPCs, big companies, and they act as the system integrators. And what they will have to do is they'll find it and, you know, in most utilities, you have to have up to three different meter manufacturers because of the volume going into each utility. So they'll actually place orders with the meter manufacturers. They will then choose whether to go RF or cellular. Hopefully, it's RF and and come with us. And then they'll also look at a meter data management player to actually complete the the jigsaw, and they'll do the system integrator work themselves. And what they're finding, what they're doing now is getting large infrastructure funds to fund these projects. And if you think if you imagine 1,000,000 units, you have to fund between 80 to $100 to offer a full end to end, including everything that I've just said, the meter, the communications, the meter data management system, and the SI work. That's about 80 a 100. So multiply that a million times. You can see 250,000,000 is a huge amount of money needed. And this is where the government of India have been very smart, very clever because their strategy is this. First of all, they're going to take the grid from analog to digital.

19:05 Secondly, what they're then doing is going from postpaid metering. Everybody's going on prepaid metering. What does that mean? Well, all the cash then is paid by the consumers upfront before that utility has to buy on the wholesale markets, the the the electricity. And it makes those then profitable. And once they've done that, the government of India, their owns the majority of the 88 utilities in India, majority of that then they will sell off to the private industries. And interesting enough, it's like a Trojan horse with a lot of these players because once you sell smart metering in there, you know exactly who the good payers are, how much revenue is coming in from those consumers, etcetera, etcetera.

19:50 So it's like doing their own due diligence by having smart metering there. They can then decide in the future whether they want to actually acquire that utility or not when it comes onto the market. So that's a great strategy. And the the other part of that is the government actually give these advanced meter the AMI sorry, prime service providers. They give them between 1522% grant money, that's free money, for each project to actually go ahead and some cash upfront, which is what they get when they supply the meters. So it's a it's a real good strategy whereby they're getting the private industry to fund this rollout. It isn't all the money coming from the government, and yet the

20:31 benefits will come to India, to the consumers, to the government, and will improve the infrastructure immensely and stop a lot of the the the power outages that happen on a frequent basis. I mean, in some states, you have multiple blackouts every day. You know? So, you know, this will improve all of that. And just to finish off then, the top one shows the utilities that we we all sell to. And as you can imagine, as we sell through our partners, our communications then is there not only for the ten years. Because if you think about it, at the end of the tenure of that contract, if they didn't continue paying the support and maintenance for the software, it goes back to being a dumb meter. Well, that's not gonna happen, is it, after spending all of these billions on on on rolling that out? And I'll give you an example. Our first customer was Tata Power in Mumbai. That was a five year contract.

21:24 At the end of five years, they're then renewed for another five years on the support of maintenance. So there's an example that it just continues and you negotiate again going going forward.

21:36 So when you look now coming sort of more focused onto the the numbers, etcetera, And the great, you know, organic growth that we've had, you know, fourth fourth year in a row that revenue has gone up, you know, gone up quite a lot to maybe £12,000,000. So that's 23% growth, which I think in this climate climate, any company can get growth at 23% is very good. And, you know, this was really constant you know, with the currency performance, it really as we call it, constant currency performance is in line with our expectations. And you can then see that the, you know, the the some of the revenue depreciation there that come into it, did sort of change some of that. So I'll let Heather now just speak a bit more in that detail.

22:25 Yeah. So so as John has said, you know, we we've seen year on year growth again. So if if if we think back to our financial year, March 2020, our revenue for that year was around about 2,500,000. So you can see the growth that has continued from then until now and 23% for this year. What what John is referring to in terms of the expectation and where there were variances against the the market expectation, Part of this was as a result of us when when we put out, you know,

22:56 all all the revenues that we take are in currencies other than sterling. So in India, we will transact in rupees, and in the rest of the world, we transact in dollars. And when we put out market expectations in September last year, exchange rates were you know, the the pound was a lot weaker than than it is now. And over the course of the year, obviously, that resulted in in quite a large difference, as you can see, 500,000. And the reason for this is really because significant part of our revenue was recognized in

23:28 q four of the year with 6,200,000 well, more than 6,200,000 in February and March alone when, you know, the the exchange rates were were well, the the pound was at its strongest. And then just under IFRS 15 with the way that we have to recognize certain elements of the contract, that's what know, there there's about 300,000 that is spread over the term rather than us taking the revenue last last year. Gross margin. So gross margin during the during FY '23 was lower than we've seen in previous years, mainly as a result of us selling third party hardware products in in other regions. So these these margins are not margins that are typical in India. This is purely as a result of the the hardware that we were selling in the rest of the world.

24:15 And, you know, while it looks like a big difference to FY '22, we will see over the years, we will see fluctuations in in the margins because the, you know, the different elements of our contract have different margins. The hardware will be the lower margin element, and that will be in the first couple of years of deployment, rolling out, and shipping the the products to our customers. And then as we move into the support and services going out over the the remainder of the contract, the remainder of the ten year contract, that is at a much higher margin. So

24:50 initial cut a couple of years of rollouts in India will see a lower margin, and that will eventually change. There might be some years as well where, for example, we get different revenues from different revenue streams from other areas that might be at different margins. So when we talk about our typical business model that is always India, but, you know, as as we've seen last year, if we get revenues from from other territories, that might be at slightly different sort of margins.

25:19 There was also an increase in adjusted EBITDA loss partly as a result of the gross margin, the lower gross margin. Then as John talked about, the scaling up that we're doing to meet the demand and the contracts, GBP 2,300,000 that we're busy rolling out, there were higher operating costs. And then the sort of largest item contributing to this is an impairment in intangible assets. So intangible assets, we back in 2016,

25:51 many of you will be aware of The UK smart metering contract that we acquired when we acquired CYANCONNODE. And as as is typical in accounting, when you acquire a company, any large contracts like that, you would, you know, capitalize as an intangible asset on the balance sheet. And what what's really happened, as you know, over the years, there have been significant delays to the contract. It was originally supposed to be all complete by 2020. It only started rollout at the end of two thousand eighteen,

26:21 and it was then pushed out to 2024, and during COVID, pushed out to 2025. And then what's happened more recently is that we've had communication from our customer, Toshiba, who provides the hardware on this. We only provide software on this contract. So Toshiba provide the hardware, and they've been advised of an end of life component by their their supplier, Telet. And as a result of this, you know, there there's sort of a finite number now that will be supplied using mesh. This this end of life component is purely for the mesh hubs. There's there's two types of hubs that get sort of installed for this contract depending on the area that that you're located in. You know, we provide our softwares to cover the knot spots, and that's obviously areas where there is not a very strong mobile signal.

27:12 And, you know, so so there's this finite number of mesh hubs that can be deployed.

27:18 And we we took a view that even actually if all of those were shipped, we wouldn't be required to impair the investment, but the intangible asset. But we took a view that because of delays and if, for example, those don't all get connected, we would it was sensible to take an impairment. Then looking at cash collected from customers, I know many shareholders always ask, do we get paid in India? And you can see that this isn't all India, but over the course of last year, we collected GBP 10,700,000 cash from customers, contributing to the cash position the end of the year cash position of 4,100,000, which was up from 2.4 in the previous year. Heather, can I just say Heather, sorry? Just say on that, just to emphasize that of the contracts that we take, especially in The Middle East, those are hardware only. So as Heather said, at the beginning of a contract, it's always hardware. Later on, it's a software and services. So if you look at software and services, they're more like a 100% gross margins.

28:18 So as we go over the years after the installation of the hardware, all of that kicks in, and we end up having then what we call an annuity, a buildup of services and software, you know, from several contracts, etcetera, so reoccurring revenue streams. And just to say on The UK contract, I did write to the prime minister, Rishi Sunak, about the rollout and what where the failures are going across the piece. Interesting enough, I did get a response through his one of his energy minis one of the energy minister, and we've had several conversations with them and DCC and also Bez as as when he was formed to talk through how they're going about going about this. And in actual fact,

29:00 the three g network and then with a no. You know this, but it's gonna be refarmed or, actually, they're gonna stop using three g in the future years and move to four g. And just to move from three g to four g is gonna cross cost an additional £4,500,000,000 sterling on top of what's already the cost of 13,000,000,000 to roll out The UK smart metering.

29:23 And a lot of the homes will get and be disrupted again. So you can imagine when they go to five g, six g, etcetera. So it's just one of those that probably somebody didn't think about the future of when, you know, networks like cellular networks upgrade and change because there's only a finite amount of actually bandwidth. And in fact, some of the MPs, you know, have been up in arms. So peep you know, representing, you know, Wales, the Cotswolds, Devon, and Cornwall saying, look. How are you gonna do this without having not spot coverage, you know, where mobiles, you know, don't work? So that's really up in the air still and the question for the powers that be to to what the what they're doing. And as Heather mentioned, remember, ourselves as CYAN, when we acquired CYANCONNODE in 2016, and that's why we're known as CYANCONNODE from Sweden when we acquired them.

30:12 We weren't involved in the negotiations. That happened a couple of years previously. So we we inherited that contract, and we're just being prudent, really, of taking that impairment. And, you know, I don't really know with impairment, but, actually, if we ended up getting

30:26 more revenue, you can claim that back in forward years, in future years. So, you know, we just thought we'd do that because of what's going on in some of the lack of communication to us of what's going on because we're like the tail of the dog. You know? The contract's DCC. It then goes to Virgin Mobile o two. It then goes to to who do the hardware, etcetera, and then it comes to us where we just supply the software. I just wanted to give a bit more color as on that for you. Thanks, Heather. Okay. And then on the balance sheet, you know, some of the sort of key points on the balance sheet, I think everybody always focuses on the trade and other receivables.

31:06 This is GBP 7,400,000 at the end of March this year. And we often see actually the trade debtors, in particular, in March are at sort of a peak because of the year because of the fact that we take our highest revenues usually in the last sort of quarter. And as we mentioned, you know, there's a significant amount of revenue taken in February and March so that a large portion of that wouldn't have been collected yet by the end of the year.

31:33 With, you know, we we as we've mentioned before, one way that we get paid earlier, which is obviously good for our our cash position, is that we do letters of credit on all of the hardware that we ship. And, we discount that with the bank and just under the way that we're required to report this. This is the amount that we've been paid under invoice discounting is shown as a short term borrowing on the balance sheet. So the net amount of the trade and other receivables would have been GBP 6,800,000 at the end of March. We've received GBP 3,600,000 cash from customers since year end. A large portion of this would have related to financial year '23, leaving approximately 3,200,000 from FY twenty three days remaining. Some of this is still milestone based or to be paid over the period of the contract depending on the sort of scope of the contract.

32:28 Then there's, you know, some of you may also see in the noncurrent assets, there's an amount of 2,100,000 that appears there. Part of this, about GBP 300,000 is actually for a bank well, it's in lieu of a bank guarantee. What we do so that we don't have to provide bank guarantees upfront to customers, which would mean providing an amount against the contract to us actually even receiving anything against the contract. We have an agreement on most of our our historic contracts where that our customer will retain an amount, anything from 3% to 5% from their invoices, and that's under the bank guarantee under the same terms as the bank guarantee. So in other words, we would expect to receive that in the future at the time that bank guarantees would normally be expected to be to be released.

33:19 And then under IFRS 15 as well and the new contracts that we're currently doing, there's an amount the the balance of 1,800,000 sitting as a contract asset, which is for revenue that's recognized, not yet invoiced, and this is expected to be invoiced over the period of, you know, the the next few years. We would have we we've seen an increase in inventories as as a result of purchasing advanced components. So some of these, you know, I think we've talked before about one of our key components, which is silicon for the modules. But also, there's a a large amount that we've had to purchase for the gateways because there's there's actually an end of life component, and we want to ensure that we we we are in the process of developing and we'll be launching in the next couple of months a new gateway with new components.

34:09 But just to supply against all the demand on the previous, we've purchased advanced components in advance of that end of life component just to ensure that we can deliver our orders. And some of the operational highlights. We've already mentioned, you know, so during the period, we secured orders for 2,300,000 units, and that's as opposed to the 1,300,000 that we'd won in the whole sort of ten years prior to that. That was just in India that that we're talking about. And then we won two orders in the Middle East, North Africa region. One of them was an order for 6,700,000 US dollars for NB IoT gateways. Now during the year, we supplied about two thirds of that. And in fact, actually, we're currently in the process of arranging another shipment of about 8,000 units. So just I was supposed to give some context, that that order was for 65,000 units. We we shipped 46,000 during last financial year. We're shipping around about 8,000 in the next month or two, and then the rest is expected to be deployed during this current financial year.

35:15 The other order for cellular gateways also in The Middle East, North Africa region was for a value of USD 2,500,000, and we actually supplied more than the contract was was made up of. You know, the the contract was for 60,000 units, and we shipped sixty sixty three thousand on that. Then John's mentioned earlier about the strategic framework agreement signed with IntelliSmart to deliver 3,000,000 units. Now this contract was done where it sort of sets up all the the standard terms and conditions you would expect to see. So, for example, you know, payment terms and certain terms under delivery, so that when when they want to award an order to us, they can just refer largely to that contract.

36:01 There will often be some small differences on the contracts depending on the scope and the requirements of the RFP of that particular tender, but it's just really to help speed up when they want to place an order on us. Then deliveries that happened during the year, 391,000 OmniMesh modules shipped against current contracts in India last year, and some of them were on other contracts around the rest of the world as well. But majority of that was India. I've talked about the forty six six thousand NB IoT gateways and 63,000 cellular gateways against the other contracts. And we had a backlog at the end of the year of 2,000,000 units still to be delivered on our contracts that we'd won at that point. And that's once again just referring to India, that GBP 2,000,000 backlog.

36:48 In supply chain, I think we've mentioned over the last couple of years, supply chain is a critical area of our focus because when, you know, for example, when we receive an order, I've I've I've already mentioned about how the way that the process goes is that a contract would be awarded to the prime bidder, and there might be a period of a couple of months while everything is set up. And by the time the order is actually placed with us, there might be, you know, under the standard billing document, they have a requirement to install, say, for example, 5% within seven months. So there are requirements as to what need to be shipped by a certain period of time. And as a result of that, sometimes we get an order and we're required to start delivering almost immediately. So that's the reason why we have to ensure that we have the, you know, the the components and and other stock of of anything that's, you know, long lead time. I mean, a lot of the components are still up to twelve months lead time. But even if it is just, you know, two month lead time, if we're required to ship within a month or two of getting an order, we have to make sure that we have the correct stock in in place.

37:57 We have, you know, we have very good relationships with Silicon Labs directly, and that's who we buy the silicon from, as well as CIRMA, our contract equipment manufacturer who we worked with for ten years, and and other contract equipment manufacturers. We we've mentioned that, I think, the BIHA order that we won during the year, we're using, you know, one division of Genius to do the manufacture on that as well. And really sort of I I guess we focused on expanding the supplier base to ensure that we're covered with with regard to requirements because as the orders get larger, we need to ensure that that, you know, we we can deliver to the requirements. I'm just saying, Heather, on that as well. You know, we we have and what we do is because, you know, some years back, it used to be twelve twelve week lead times for a lot of the components.

38:49 Now it's twelve months, and, know, the car industry was hit by this during COVID. So we've got a great relationship with ecosystem of partners all the way through from, you know, the distribution company in The UK is called is Solid State that we work with, who then put on the orders to Silicon Labs in The USA. And we have it what I call a trombone. So we give forecast now for twelve months, and we have a flexibility with solid state of being able to sort of come in and out of that as we know when we need to scale up more or whatever's happening. But then it goes firm on a on a three month lead time with solid state and then on to CYANLabs. And, you know, just the other day, myself and Heather met the owner of Surma. They've they've been a great success. I mean, they floated their company just over twelve months back on the Indian stock market at 300,000,000 equivalent £300,000,000 sterling.

39:42 This this right now, it's worth about 900,000,000 equivalent sterling. So they've done exceptionally well. He he said to us, he said, look. If you need another production line, I'll set one up for you, John. You just let me know what are the volumes, when, and etcetera, and we'll work together. So we've got some great ecosystem of partners to make all of this work, and that's really important that we look at the back end as well as we look at the the future end of of additional orders. Thanks, Heather. K. And then just talking about some post period highlights. We we we sort of passed first quarter plus another month now, but this is talking about for the first quarter to the end of June. Revenue to the end of June was in excess of 2,800,000, which is twice the revenue that we reported in the whole of the first half of last year. Last year, I think what we saw was we came into the year with quite a low backlog because we delivered majority of the 1,300,000 that we'd won prior to that.

40:38 And it took some time, you know, we we won 300,000 from the SAM by sort of May, June time, then a million on Bihar was was announced in in August, and then another million on the Jabalpur contract in Madhya Pradesh in in January. The majority of the large scale orders came through in the back end of the year, which is why the revenue was really skewed towards the second half and such a significant amount coming through the last couple of months. And you can see the momentum has continued into the first quarter of this year. We won the order for 600,000 OmniMesh modules by a subsidiary of IntelliSmart. So that subsidiary is really a special purpose vehicle set up for that particular contract.

41:24 And we shipped 291,000 modules in the first quarter versus 391,000 for the entire financial year 'twenty three in India. And 3,600,000 cash received from customers in the first half sorry, in the first quarter. Then some other business was the MOU that we announced with Alphenar. They're a Saudi company, and this MOU is to potentially go into other territories, not just India. They're based they're also they have an office set up in India. So we do work with them in India, but around the rest of the world, if they have opportunities around the rest of the world, there's there's an opportunity for us there as well. And we closed the end of June with a backlog of 2,300,000 units to be delivered in India.

42:11 And and then I think it's also important, you know, Dun and Bradstreet, obviously, very reputable company, and and they recognized us as start up trailblazer. That's the Indian entity in particular. John, Heather, thank you very much indeed for your presentation. Ladies and gentlemen, please do continue to submit your questions using the q and a tab situated on the top right corner of your screen. While the company take a few moments to review those questions submitted today, I would like to remind you that a recording of this presentation along with a copy of the slides and the published q and a can be accessed via our investor dashboard. John and Heather, as you know, we have received a number of presubmitted questions as well as live questions throughout today's presentation. And if I may, Heather, hand back to you to address those questions you can and give responses where appropriate to do so, and I will pick up from you at the end. Thank you.

43:04 Okay. Thanks, Alex. So with regards to the questions, if I go through the first one, this one, John, I'll leave to you to answer. But the question was, with the company's ever developing success in the electricity metering market, what plans are underway to develop systems for water metering? Yeah. So as you could probably imagine right now, with 250,000,000 in India that we're we're chasing, and and those will be orders placed in the next couple of years, we're very focused on that on the electricity market. So we're not wanting to sort of defocus and put resource onto other areas like water metering, like gas right now. That's something that we'll look to the future when we develop the the unified HAES product and the Weissen product. But right now, let's keep focus, you know, win those orders, and we can look at, doing other verticals, later on.

43:59 Thanks, John. And then the second question, is CYANCONNODE likely to introduce a licensing business model for its products similar to the ARM business model, or is this model not right for our business? That one also for John. Yeah. Thanks, Heather. Again, you know, actually, we do have a model to to do licensing, a royalty type of payment where they pay something upfront and they're royalty on when they manufacture it. And we have discussed this with several customers. It's really further on from being a contracted equipment manufacturer. It's giving them the rights to do that, and they they design and make all the components, etcetera, to us to our recipe, basically. But to date, there's no one that's taken that up. So it's there if it if it's required. But at the moment, we we have moved on to a new model, business model in India anyway, where we get some CapEx upfront, and then we have equal monthly installments, as Heather has said, instead of having milestones.

44:56 And those would then roll out for eight years after the two year installation. Thanks, John. And then the third question, can you give some indication of the number and types of entities, I e companies, organizations, etcetera, that CYANCONNODE is currently working with and and or collaborating with? Yeah. Well, I'll make the I mentioned some of some of our suppliers, you know, like Solid State, Silicon Labs, CIMA, GENUS, and others that we're working on there. And, obviously, then I've mentioned, you know, about other meter manufacturers, and I'm saying there's 10 in India. There's others around the rest of the world that we work with. And then I've mentioned the engineering procurement companies already in the presentation and the system integrators.

45:44 And in particular, you know, IntelliSmart, I mean, they've done some terrific work. I mean, you know, IntelliSmart was born out of ESL, energy conservation company of which is wholly owned by the government of India. And now IntelliSmart is basically 49% owned by the government and 51% by national Investor Infrastructure Fund. And they turned around all the projects that were under ESL, yeah, which had an SLA something like 90 to 95 sorry, 80 to 95%. And now they've gotten them up to 98%. So they've done terrific there, and they continue then to win business and and lead the the march really out of everybody in India as we speak.

46:32 So some real good quality people in that organization that we work with. In total, the the I I suppose adding them up just briefly, I suppose with Circuit sort of yeah. We're between, I suppose, 10 to 15 partners that we work with go to market just just in India. So that that's quite something. Thanks, John. And then as of the meeting date, August 1, how many employees does CYANCONNODE employ, and what percentage of these employees are employed in India, UK, and rest of world? So we we we only have employees in UK and in India. We don't have actual employees anywhere else in the world, but we have contractors in other places, like, for example, in Thailand as well. If I look at it and this is as of today, and it changes all the time because we are doing so much recruiting. So, you know, it it is literally changing on a daily basis. In The UK, we've got 37 permanent employees, and in India, we've got 56 permanent employees.

47:34 So you can see there's a lot more in India, with a lot of those being focused on the project rollouts and, you know, the the the sort of deployments and project management. And then in The UK, we've got 60 contractors, and we've got 87 contractors in India. So that's a total with permanent end contractors of a 147 across the the two entities. And then the next question, is the order for 600,000 units part of the framework agreement for 3,000,000 units or completely separate? Yeah. No. It is part of the agreement. As I mentioned, this now the agreement of 3,000,000 is down to 2,400,000. As I say, we're using this as beachheads to new utilities, a, to stop the competition getting on there and go for first mover advantage. So, you know, we may get, you know, other orders, you know, 300,000,500,000 from that and and eat into it as we go along. So it's a call off contract as we call it.

48:36 Okay. And question six, are these much lower gross margins likely to be a permanent ongoing feature? I think as I've explained earlier, you know, the the margins are going to vary over the different years depending on the stage of a contract. Hardware will always be at a lower margin. And if we do do similar to what we've done in the last year where we sell through third party hardware, that could be at a lower margin. Our standard business model is not expected to be as low as those margins, But, you know, it it's it it all depends on the stage of the contract and the particular products and and the requirement. And overall, as I say, it's it's not expected for our usual product suite. And then the next question is, can you please provide a basic approximate revenue figure of what revenue per annum a typical perpetual license and its annual maintenance contract could produce a 1,000,000 produce on a 1,000,000 deployment.

49:37 Do you envisage to make a profit on either or both contracts? And if so, how much per million deployment or per module per annum? This is is something as you can imagine. I mean, if if we sort of put a lot of this information out in the market, it's very commercially sensitive. So I don't think that we can go into detail on our actual pricing for that. The next question, in the Zeus report dated 03/07/2023, there's a reference to the company is a global player and a market leader in India, where a government scheme, as set out below, has mandated the procurement of two fifty million meters by March 2025, a significant market opportunity for CYANCONNODE. Can you clarify or elaborate, please, on what is actually meant by, in inverted comments, the procurement of two fifty million meters by March 2025 in connection to the overall installment of the smart meters in India?

50:38 Yeah. I'll I'll take that, Heather. And so yeah. So, I mean, there's there's various articles that's come out about this. I mean, the the saying that, you know, they're stating, you know, two hundred and fifty million will be installed by March 2025. However, that seems unlikely when you think it takes twenty seven months for an installation to be done. So I think we can all work that out from now. So this is unlikely. So we believe, and this is what we believe in CYANCONNODE, that by the the end of twenty twenty five, they would have procured 240 sorry, 250,000,000 smart meters. But look. It's gonna take at least eight years, if not ten years, to roll this out. Let let let's let's let's face facts. I mean, this is a huge number. Look how many it's taken just to roll out to 27,000,000 homes, you know, in The UK and the delays, etcetera. So, yeah, unless you you've got a magic wand that isn't gonna be installed in that time frame.

51:31 So we look at procurement of orders placed by that time is is realistic, especially as we said earlier on, you know, the sanctioned 200,000,000 units right now, and there's they're all at various different parts of the tender stage. Okay. And then the ninth question. In FY twenty twenty twenty three, what percentage of the revenue was derived from India? How much from MENA and how much from Thailand? I think this is actually in our annual report as well, which our annual report was posted at shareholders yesterday, and it's actually also on our website at the moment, just just for reference. But from the MENA region, we took 5,800,000 revenue. From Thailand, it was about 140,000. Other territories around the world, 200,000.

52:18 And India, 5,600,000 revenue last year. And there's another question on gross profit. The reduction in gross profit was a result of using third party products. Does this apply to the Indian market as well as MENA? No, this is a different product. I think we've covered quite a lot on gross margins. So going on to the next one. In the Hartmann broker note of '21 of the third twenty twenty three, for FY 'twenty four, the forecast was a small pretax profit. You still anticipate the full FY of 2024 being profitable? Now in terms of guidance that's issued to the market by these various research analysts, they put this market guidance out, and we haven't issued any changes to anything. So at this point, nothing has changed because, you know, otherwise, we would have made changes to the guidance.

53:10 Question 12, the very significant level of recruitment for CYAN INDIA announced earlier this year came as a surprise. Reasons given are for the scaling up of operations. Are CYAN now having to undertake additional responsibilities for further development and implementation work in India that was not envisaged last year? No. Not at not at all. The the resources are needed for the delivery now at 2,900,000 units. As I say, we were resourced up for doing, you know, 1,300,000. So you can see that that more scale. And and, you know, plus, you know, we're looking to the future of winning additional orders. So that's why we're we're scaling up. It's the wave is here now, and we've got it ride ride the wave. Okay. Then in April 2022, it was stated that recent fundraising had been required due to global supply shortages of silicon chips and new suppliers required significant upfront payments.

54:05 Also, the need to increase inventories to meet bigger order numbers. With supply shortages now easing, our suppliers still requiring significant upfront payments. I think I covered some of this earlier in the presentation, but as I mentioned, you know, for example, end of life components or particularly hard to find components we might need to pay upfront. And, you know, there is still a long lead time on components. So to ensure that we can fulfill orders at a relatively short time, that's why we would be, you know, ordering in advance of actually shipping. And then the the fourteenth question, at what level of rapid growth would CYAN require additional working capital? I think that that really depends on what that rapid growth looked like in terms of volume and and delivery requirements.

54:56 So I think if if we because we've only got five minutes left. So if we sort of have a look at some of the live questions, there's another one on gross margin, which I think we've we've covered quite a lot. And then next one for you, John. In in Uttar Pradesh, there's a 13,000,000 RDSS award, and CYAN have won 600,000. Do we expect more to come? Yeah. As I think I've covered this really by, you know, looking at, you know, what we call beachheads and and doing that. So, obviously, we do that, do it well, we'll get follow on orders. And, look, we are speaking to everybody and anybody on all the projects that's out there at different stages. There's not one outfit who's a lead prime bidder that we're not talking with.

55:45 And then there's another question. Over what period do we expect the 3,000,000 framework to be called off over? Yeah. Again, you know, watch this space. You know? As as and when the, you know, the orders are won and everything's in place, we'll get more from that, and it'd be just a call off. So I can't really put a time on it. It's it's all down to IntelliSmart to award that to us. And then where do you see IoT opportunities away from metering evolving? Well, I think I've mentioned that already, Heather, haven't I? Saying, at the unified heads. Look at you know, we could go into other areas. I you can go gas, water, EV charges, and all that type of stuff with the platform that we're building once we complete the unified has as we call it. So, yeah, it's we are looking to the future.

56:32 Okay. And then do you see any key countries with similar transmission and distribution losses to India where smart metering solutions could make a difference? Yeah. I mean, you know, there's places, you know, where we're talking, as I say, now we're we're sort of talking and I've had people out in Malaysia, for instance. You know? Indonesia is another place that we're looking at. So quite similar there to to India, but not not as loss making as such. But as as I've said earlier on, our focus is land grab for the next two years really focused on India. So I don't wanna dilute ourselves too much around the rest of the world right now. And then I think there's one last one saying, you anticipate further fundraisings?

57:19 Now I I think it's difficult to say in the future. Obviously, as the company grows, there may be needs for working capital. We've mentioned this also within our our annual report, so it it it's not something that we can predict for the future. It all depends on growth and working capital requirements. John, Heather, thank you for that. I believe you have addressed all those questions you can for investors today. And of course, the company will review all questions submitted today, and we will publish those responses on the investor meet company platform. But before we direct our investors to provide you with their feedback, which I know is particularly important to yourself and the company, John, could I please ask you for a few closing comments? Yes. Thank you. Thank you. Well, thank you everybody for for listening and and being shareholders of CYANCONNODE. Really do appreciate that. And I think as Heather said, we've had a great start to quarter one, you know, more revenue than, you know, in that quarter than the whole of the first half, you know, double of what the first half was last year.

58:16 So we expect a a good future. You know, it's fourth year of year on year revenue growth, which is great. And, you know, we are constantly investing in people and the product to keep the functionality and the features going forward and scalability. So you can imagine with all that going on, we are extremely busy and really focused on delivering shareholder value. John, Heather, thank you once again for updating investors today. Could I please ask investors not to close this session as you will now be automatically redirected to provide your feedback in order that the board can better understand your views and expectations? This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of CYANCONNODE HOLDINGS PLC, we'd like to thank you for attending today's presentation, and good morning to you all.

59:05 Thank you. Thank you. Thanks, Alex. Thanks, everybody.