Ensilica (LSE:ENSI) — Final Results

0:01 Good afternoon, and welcome to the ENSILICA PLC results investor presentation. Throughout this quarter presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time by the q and a tab situated in the right hand corner of your screen. Just simply type in your questions and press send. The company may not be in a position to answer every question received in the meeting itself. However, the company can review all the questions submitted today and publish responses as appropriate to do so. Before we begin, I'd like to submit the following poll. And I'd now like to hand you over to Ian Lancashire. CEO. Good afternoon, sir. Good afternoon. Thank you very much for the

0:32 introduction. So we're gonna do our, financial results for our financial year ending 05/31/2024. So, our financial year f y twenty twenty four. Just the usual disclaimers leads you to read that at at leisure, and, I mean, I'll start by introducing myself. I'm Ian Lancashire, CEO and, cofounder of ENSILICA. I started I started my career at PLC, one of the great British engineering companies, and moved into semiconductors in the mid nineties working for Hitachi and Nokia. I set up ENSILICA in 2001 as a semiconductor consultancy company, and, you know, I I've seen through the

1:24 stewardship of it into one of a fabulous semiconductor company, and we'll talk about the progress of that during the during the call. And I'll hand over to Christoph to to introduce himself. Thank you very much. I'm Christoph Rodemann, chief financial officer. I graduated from Stannenbosch University in 2002 and started my finance career with KPMG in South Africa and after that with KPMG in Reading in The UK. I then moved on to a small niche biopharmaceutical company where I was The UK and Ireland finance director, after which I worked as group financial controller at Oxford Biomedica PLC, a listed company I'm sure you're all aware of.

2:16 Most recently, I've I've been with ENSILICA since since May of this year. Thank you. So it's my privilege to take you through our financial highlights. We'd like to start with revenue. We are very pleased for that to have grown by 5,000,000 to 25,300,000 from 20,500,000 in the prior year, a growth of 23%. And as you will see, we're seeing continuous growth in our revenues, and we expect to generate further growth in financial year twenty twenty five. EBITDA has grown by 100,000, so not not as big a a growth as the revenues. This is because we've had a large tape out for for a for a new chip that we hope to go into production in in in the next few months.

3:17 So that impacted our gross margins, which which has meant that our growth has only been million, although we do expect that to grow much more substantially in financial year twenty twenty five and for our margins to go back to the expected 40% that we've seen in the past. Operating profit for the same year for the same reason is also up only 100,000 due to the tape out. Our administrative and other costs have only grown by inflationary measures. So the main difference was the impact on on margin from the tape out.

4:02 Profit after tax swung into a loss for financial year '24. This was primarily due to a noncash deferred tax charge that we had to post on our on our intangibles capitalized because the company gets an r and d tax credit benefit on its on its capitalized development costs. It needs to book a a deferred tax charge for that. So that's that's the reason for the swing, and and and that has also translated into the earnings per share loss of 0.23 p per share. Cash, I'm pleased to say, is 5,200,000, an increase of 3,100,000, which was positively impacted by working capital movements of NOK 2,500,000 as well as equity raise of NOK 6,500,000, offset by intangibles development cost capitalized of NOK 6,400,000.

5:13 At this point, it's also worth mentioning that we recently refinanced our external loans with Lloyd's, which unlocked a further 2,100,000 of working capital and also much improved interest rates on on the outstanding loans. We also have a a potential 3,000,000 accordion option subject to credit approval, which we will we which we would expect to be able to draw down in future. Thank you. So our business, we're a fabulous silicon chip manufacturer. Our assets are our people, IT customers, and suppliers, and we have a 170 staff across UK, Brazil, and India. We have a strong IP platform consisting of cryptography, radar, analog sensing, wave, and beam forming, and we've had a global world class customer base, which was illustrated by being able to announce that that one of our partners is Siemens who we won a a second chip from recently in the last last two months.

6:21 We also now have direct relationships with major wafer fabs and OSATs, specifically, TSMC that we're now a a preferred supplier of or or is a we're a preferred customer of. We focus on key four key markets, communications, automotive, industrial, and health care. And then coming on to our revenues, these are split between our fees for designing chips in our ENSILICA and then our supply revenues. Now getting back to the business model, our our goal is to successfully win in our e contracts and then convert these into supply revenues by taping out the the the chip and and generating those recurring supply revenues over time.

7:16 NRE and consultancy revenues are similar other than the NRE revenues have a chip at the end from which we generate supply revenues, and we are expecting to generate margins of 40% plus on those supply revenues. The chip design phase takes two to three years. So it's a longish process, but with good future benefits. And then the supply revenues, which is what we're aiming for, is anything from seven to ten years, but could even be longer than that. So we have a portfolio of chips in supply. We've added a few in the last two or three months, which Ian will will come on to.

8:03 And the more of these chips we can get into supply in future, the more of a portfolio effect we'll see with with some chips supply over over supplying and and other ones, and and these would make up for any that might not might not meet their expectations. And that provides a strong natural hedge for us. We've got strong IP, and that also leads to high gross margins on the supply as I've mentioned before. Thanks, thanks, Christos. So now I'll run for those, you know, four focused markets. And, and the communications market, I mean, this is, primarily focused at satellite, satellite communications.

8:48 And, in in this area, the chips is going to sort of two main use cases. One of those is, is in the satellite, and that's called the payload, And the other one is the the user terminal, which is the piece of equipment each subscriber has that, is used to provide broadband their broadband connectivity. I mean, everyone would have heard of, Starlink and the you know, Elon Musk's Starlink, and that has really shown that, lower Earth orbit LEO satellites can provide resilient Internet connection. And, you know, both governments and, private investment has gone into this to produce other constellations. You know, people know about Starlink, but there are more than 10 other constellations rolling out there. I mean, last week, there was one announced by the, the EU called Iris two as a sort of $10,000,000,000 initiative to to do it, but there are other ones from Amazon, OneWeb, and, you know, other governmental and private constellations, rolling rolling out there. So the the the great thing is if we just talk about user terminals at the moment, if you use Starlink as an example, the Starlink terminal has, 600 RF chips in it and, about 20, 20 beamformer chips. And there are 4,000,000 subscribers, so there are billions of dollars of silicon that have gone into, you know, that Starlink used for,

10:18 for their user terminals. We've been very active in this market with support from the European Space Agency. We've developed, two chips. One's a RF chip and one's a beamformer chip, and we have traction in that winning winning our first design win with a 2,500,000 contract for sort of satellites on the move applications with the German company, and we have traction with other, user terminal providers providing chipsets, which are either, you know, selling the ones we've developed or derivative derivative ones. So a very exciting market with huge potential of chips in these these user terminals, which are called phased arrays

11:02 or smart, you know, smart antennas. So, on the payload side, we're active there as well. I I mean, the the volumes of the chips are are are a lot less, but you still get hundreds to thousands of satellites in a constellation. And, you know, one example there is we've had a a major contract with NASDAQ listed company, AST Space Mobile, to deliver their, chip for their next generation, their next generation satellites, greatly improving the performance of, of those. One of the interesting things because of, you know, the the rise of this new space sector, it is very much merging with, what they call a terrestrial networks, which is your standard five g and then coming to six g. And, and those two standards are coming together with a with a thing called a nontarrestrial networks, five g nontarrestrial networks, and that's leading to sort of, you know, design wins on the terrestrial side. And one example of that is a a $30,000,000 ASIC win with an Italian telecommunications provider, and they're being funded by European chip act money to develop chips for their for their new products. So communications sector is a, you know, very exciting sector with huge potential of, upside on on on volumes there because the amount of chips that are used in these face arrays.

12:33 I mean, automotive, you know, this is a, you know, a a huge sector in terms of value of semiconductor products, and, you know, there can be up to 3,000 chips in a high end car. And, you know, the the the the use of chips is driven by electrification, advanced safety features, infotainment, and, you know, increase in cybersecurity requirements. Like all of these areas, I mean, you have to pick a niche that to focus on, and our niche in this area is around motor actuator controllers and sensor interfaces, including things like radar and LIDAR. I I mean, as an example, the company have, reached a key milestone of shipping 5,000,000 automotive chips, and that's part of a contract worth, $40,000,000 over, over six years. So, you know, we're shipping products, generating, you know, good, good revenue from that, from that.

13:31 And we have another design win, which we announced last week, which was also in a niche, a niche area, which is in the, actuator motor controller, which is worth 31,000,000 over sort of seven, seven years. And the company is actively bidding for RFQs with other, automotive tier ones. I mean, it's very much a a, you know, club automotive club is difficult to get in, but when, you know, when you're there, then there's good revenue and good visibility of recurring revenue from, from from automotive chips. So cover the other key focus, actually, very similar to, to the automotive area. Lots of the customers talk German, very similar types of chips.

14:17 So, you know, you you'll be surprised that from a silicon point of view, the industrial sector, you know, similar value to the, to the automotive sector, and these chips are used in, you know, enhancing efficiency, precision, safety, reducing waste. And, really, the the the silicon content of, industrial chips is being, is is being driven by AJAIT, which means that the, you know, the the the amount of silicon, hence, the selling price is higher because of the the overhead of neural network accelerators in the, in the in the chips. Also, new cybersecurity legislation is driving the redesign of many chips that could have been in, you know, in production for for years, but the the new legislation requires new encryption algorithms and greater security leading to their redesign.

15:15 Again, you know, our niche in this area is about sensing and control, often including ARM ARM processors. And as an example, Christos mentioned, we announced Siemens as a a second design win with Siemens. I mean, they're a leader in this sector, and, you know, we we had another chip, which is which is an industrial controller chip, which, you you know, just to give you a feel with the type of contracts, 30,000,000 over, over seven years, and we've received the, the first production order, and we'll be shipping, we'll be shipping those in the first part of next, next calendar year.

15:56 The company is actively bidding for for RFQs in the industrial, you know, in the industrial sector. There's a lot of activity going going on there with a lot of re redesign of of chips and, you know, adding new features. Talk so that, I mean, health care, I mean, again, this is a you know, this is a large sector. I mean, the, one of the issues with this sector is a longer time to, to revenue. So, we've slightly defocused from this sector. It's one because of the time to revenue, but but also because of a lack of capital to be able to invest in the, the commercialization specialist sales and marketing to, to focus on this, this sector. But, you know, there there are, interesting products, everything from smart rings to smart devices to things like diagnostic devices where, you know, the the data is put in the cloud, take take take, monitored and then put in the cloud to provide diagnostics.

17:02 So I said it's a, you know, it's a market where we have key IP and expertise, but it, over the previous period, hasn't been a focus because of restrictions in capital and focusing on the, you know, driving the, reoccurring rev rev revenue up in the near term.

17:21 His yeah. His you know, we've we've had a very active, six months, and, here's a, a selection of the design win and customer activities with that. I've mentioned a number of those during the during the, you know, the presentation, but I I'm some notable ones here is, you know, AGAI processor, which is actually a sort of supply only. The customer does the design, and we look after the supply, and that's, you know, led to a you know, we

17:51 we've managed to to do that through strengthening our position with with the key, with the key foundries. Another notable one is, we we've developed, cryptography is one of our thing and post quantum cryptography, which is cryptography which is robust to attack from quantum computers. We we've developed that, and, we actually licensed that to a large semiconductor company, and that really demonstrates the value of this this IP when when we get high value licensing deals related to the IP. But, so lot I mean, lots of activity. I'll hand over to Christophe just to walk through the numbers. So just to take you through the income statement, I've touched on some of this already, so I'll just briefly run through.

18:41 So we're very pleased, revenues going up by 5,000,000 or 23%, and we expect further increases for financial year 2025.

18:52 As mentioned before, gross profit margin was distorted by a large tape out contract. The tape out is the phase at which the the the equipment for manufacturing the the the chip is being created, which is normally at a lower margin than the in our new work done by the company, which is why we see this negative impact. However, we expect that to to change in financial year twenty five and expect to to go back to 40% margins, which we are targeting.

19:31 EBITDA, we're pleased, was 6% above where it was in financial year twenty three, although we're disappointed it wasn't more, and we are targeting higher EBITDA growth in financial year twenty twenty five. Interest costs have gone up due to due to increased interest rates and also the fact that the company took out an advance of 700,000, which was subsequently refinanced as part of the Lloyd's refinancing, unlocking 2,100,000 of working capital. As I explained before, we have a negative tax or a a tax cost in in financial year '25 because of a deferred tax, nontax or noncash charge,

20:23 which we were required to book. That's impacted our profit after tax. And again, just to illustrate, our EBITDA has increased by $100,000 from prior year, which we are very pleased with.

20:39 So coming on to the revenue split. As you will see, chip supply revenues, which is a key indicator from us, has gone up by about 100,000, not as much as we would have liked, although our we are pleased with the overall revenue number. However, we are seeing some really good traction, and we would expect the chip supply revenues to double for financial year 2025. So seeing some good growth in terms of that. NRE revenues, that has increased a lot from the prior year, by the the tape out, but also some good good customer wins and activities.

21:25 And then our consultancy revenues have come down due to the the focus on NRE. We do expect that to go back up to the the 9,000,000 level in 2025,

21:38 but it was impacted by the focus on NRE in financial year '24. Okay. So balance sheet, just to pull out some of the key the key areas. So intangible assets, we saw an investment of 6,400,000 in the co development of chips with our customers.

22:00 As you will have seen on the previous slide, there was a large increase in NRE. And with that increase in NRE, that also would indicate a large increase in our co development of the chip, which is something we do in order to achieve those recurring revenues over the seven to ten years at 40% plus margins.

22:23 Cash has increased by $2,000,000 mainly due to the cash generated from operations in our cash flows and also equity fundraisings of $6,500,000 in the year, and that was offset by our investment of $6,400,000 in our development costs, intangible assets. Date has gone down by $200,000 That's partly due to repayment of the term loans and then also the advance taken out during the year, which was subsequently converted into the Lloyd's facility. Thank you. So our cash flow, as you can see, a very positive working capital movement with cash generated from operations.

23:17 We will see some lumpiness in terms of our cash flows, but that will start smoothing out as we generate higher supply revenues, which we are already seeing happening and and and should see more of in the future. The tax credit received was 1,800,000, which was in line with our our expectations

23:41 for '20 financial year '25, we expect that to be around 1,300,000, mainly due to the changes the government has made to to r and d incentives, which which means we'll we'll get a bit less than than we did in the past even though activities are at the same level.

24:01 Investing activities, that is the the investment in our intangible assets of 6,400,000 and then also and then also CapEx of 900,000, which is IT equipment and also manufacturing equipment. And then cash flows from financing activities, that's the equity fundraising of 6,500,000, offset by

24:27 some some loan payments of the external loans made during the year. Thank you. Thanks, Christoph. So, yeah, we've got a strengthening position. It's been a good year. We've got four a six now in production, 10 more in the design phase. Those ASICs are gonna lead to robust reoccurring revenue streams and, cash generation. So, you know, we're seeing increasing number of opportunities. They're driven from things like edge AI, enhanced cybersecurity requirements, and AI will increase the value of semiconductor products by having larger larger silicon area. We strengthened our relationship with the major foundries and, generally with the ASIC supply chain, and we're offering us a supply only model where the customer does the design, and that will provide a faster path to supply revenue,

25:20 but albeit at a slightly lower gross margin. But, you know, all in all, you know, really strengthening our position in terms of this transition into a fabulous supply company. You know, just to summarize this, you know, we're trading in line with expectations for financial year 2025. We've had excellent new design wins as you've seen from the, from the slide for the new financial year, and we have a strong pipeline of, RFQs. These are building a stronger reoccurring revenue stream. You know, when you see, you know, the the level of NRE we,

25:57 we had this year, you know, that will lead down to the, you know, down the line to, you know, strong reoccurring revenues as those chips go into, into production. Supply is begin beginning to generate improved cash generation, and we're very much seeing it this year as those support four ones ramp up to production. We have the the new debt facility with with Lloyd's Lloyd's Bank,

26:25 which unlocks additional additional working capital. And we've had accreditation from, you know, renowned global customers such as such as Siemens, which really shows we're in a, you know, a a great position with top tier top tier customers.

26:45 Okay. Thanks. And, we can go on to the questions. Perfect. Ian and Christophe, thanks very much for your presentation. Ladies and gentlemen, please do continue to submit your questions just by using the q and a tab, which is situated on the top right hand corner of your screen. Just for the company to take a few moments for you the questions that have been submitted today, I'd like to remind you that recording of this presentation, with a copy of the slides and the published q and a can be accessed via your investor dashboard. As you can see, we have received a number of questions both pre submitted and throughout today's live event. And Christophe, if I could hand over to you to chair the q and a, that'd be great. And then I'll pick up from you both at the end.

27:20 Perfect. Thank you very much. So starting off for the first question, with young companies growing, cash flow is a constant issue, and I understand this was a primary reason for the last fundraise. Has the situation improved now and mindful about the new contracts you are signing? So we do not anticipate having to raise additional funds this year. We expect to to receive the upfronts from our from our contract signed, and we are also in the process of of winning a further two to three new contracts, which will which will further strengthen and and give us additional headroom. So, yes, the answer to that is we don't expect to to raise additional funds at this point.

28:10 Should we should we win a very big NRE and supply contract that could change things, but to be honest, that would be a a nice problem to have.

28:23 So moving on to the next one. In the articles of association, you mentioned deferred shares. What is the usage in ENSILICA, and who benefits from them? Okay. Yeah. I I mean, they're actually a sort of an artifact from the IPO going from a private company to with various share classes to to one of the listed company with a single ordinary share class. So those deferred shares have no voting rights, no dividend rights, no capital rights. So, you know, there, you know, the the the the there is no no value to those shares. No one will benefit from them.

29:07 So question three, how often do you still need to do share issuances?

29:13 I think we we covered that in the previous question. Is the usage of warrants needed? I would say that the the company will will will take the usage of warrants under review on an as needed basis. It does allow existing shareholders with the potential to further invest of the in the company should should they want to, but we will we will assist that should we should we decide to raise funds in the future. Then the next question. In the previous presentations, the company has suggested that current capital constraints make you reluctant to bid for some of the 100 plus million opportunities now on offer that you're part of the TSMC DCA.

30:02 This is no surprise because at current share price levels, raising the required capital would come with significant dilution. With interest rates now falling, will equity placings remain the company's preferred way to raise capital moving forward? Or will you take on more

30:17 debt to provide better shareholder value?

30:20 Again, I think we've answered that in terms of we've recently refinanced our our date for a for a new 6,000,000 facility, unlocking an additional 2,100,000 of working capital. And we also have an accordion option for an additional 3,000,000 subject to credit approval. And our our our our plans would be to to to look at using that to give us additional additional capital in case we need it before we go back to shareholders should it be available to us. How much effort is spent on marketing the company to the wider public of retail investors, I've been Okay. I mean, I'll do this one. I mean, we're you know, we actively use RNSs to keep our investor base up to date, and, you know, we are, we are doing, things things like AJ Bell share investor meetings. So, we also use, use this for for for results.

31:33 So so I you know, I mean, hope hopefully, we're doing enough for but, you know, always always happy to hear suggestions of how, you know, how we can improve our communications.

31:46 So how does 30,000,000 over seven years chip order work?

31:52 Are 4,280,000 of chips made once a year, is it more expensive to print the chips seven times rather than once? Okay. Okay. So so in terms of, you know, when we announce, the design win of, say, 30,000,000 over, over seven years, so in this case, the 30,000,000 is all, supply revenue. There's normally a sort of ramp up of the chip. It takes two years to get to full volume, and then it'll run at full volume, and then it will run down. I mean, generally, we, we will be making those chips, you know, every month, putting in an order, filling the filling the pipeline of the foundry, then the packaging house, and then shipping to the customer. So, you know, it's it's it's not that you you don't put in one big one big order for the full batch. You you, you know, you spread those over the years based on the the the customer demand, so you keep you keep flowing them into the to to the customer, and it doesn't use up too much too much working working capital.

32:56 Next question. Why was there a delay in publishing the annual report? 2023 annual report was published in October. This one was published one month later, November 2024. So the simple reason was we wanted to complete the refinancing of the loans and be able to disclose that in our accounts to show that that that we've made this improvement and we unlock the additional working capital and the potential 3,000,000 accordion. Since the euro, 2,500,000 satellite broadband contract in August 2023, has there been any indications that other potential clients are interested?

33:44 How do you see this opportunity panning out? Yeah. I mean, I I went through that slide on the sort of satellite communication sector. I mean, we're, you know, we're seeing interest both in the, you know, the chips we have and derivatives of those chips based on the technology. So, you know, I see huge huge potential for that as those, you know, they're they're building the satellite constellations now and, you know, vol and volumes for that will obviously, you know, track as the, the satellite constellations get get get launched. I mean, the these are more longer term things where it's two to three years out before we get to real high volume production, but certainly excellent potential there, and we've got some really good really good technology. Where do you see ENSILICA in three years' time?

34:33 So I think probably I'll I'll give my view, and then if you can add anything. So in three years' time, I'd like to see us in a position where more than half of our our revenues come from the supply of chips. And, ideally, you know, sixty sixty to 75% would be a nice a nice place to be. And, also, the company is generating positive operational cash flows both on a on a monthly and an annual basis, and we are really looking strategically to see where we can invest in order to further our growth. Yeah. I mean, I I I would echo that. I mean, that's certainly you know, we want to be in this, you know, situation where we we have the pipeline to do it in terms of dominated by by supply revenue that will very much smooth out our smooth out our cash flow and put us in a position where we can sort of, you know, further invest in, in differentiating technology and increase our increase our margin. So, you know, you know, our vision is to be a sort of premier ASIC supplier in Europe, and I, you know, I think we've got a great path, we can be there we can be there in three years.

35:51 Have you now built an application support team? I mean, we have application support both in sort of presales side where we have people supporting presales activities. And then once we've sort of tested the silicon, the people involved in testing the, the silicon in the lab help support the customer in terms of on the application on the application side. How much does it cost to take out the ENSILICA health care chip? Okay. So in terms of the tape out and associated cost with this type of technology, it's about 500,000. It's about £500,000, but, you know, there's also costs associated, you know, as I mentioned before, with the specialist marketing and the sales activity, you know, needed to to to generate the traction.

36:42 Can shareholders expect a quicker tempo for releasing the pre loans in 2025? The answer is yes. We would we would probably look to release at the start of October rather than early November. In silica e n s 6220, could you talk about the potential you see in this chip? Okay. So so that that's actually so that's the health care, the health care chip. So I I mean, I talked about the, you know, the potential markets there, including smart diagnostic devices and, you know, other vital signs type type stuff previously when I went through the when I went through the health care slides.

37:33 So you say that financial year twenty five revenue of 30,000,000 is 65% visible and referred to three NRE supply contracts in negotiation with 11,100,000 in NRE by year end. Is that calendar or financial year end? If they're all secured, does that fully close the the 35% gap? So I I would say that we expect to close those those contracts by year end. I don't think we we would say that we would generate and and complete those revenues by year end. So so a portion of that revenue, we we would expect to generate in 2025 and then more of that in 2026.

38:23 So whilst the contracts that we've that we've won over the last three, four years and and are looking to win or three, four months and are looking to win now will give us greater visibility. And and when we're getting getting very close to that 30,000,000, we have to win a bit more work at the current run rate that we are winning it in order to achieve the 30,000,000, but we are confident of achieving that. Please define take out which you mentioned in relation to EBITDA. I think I I I explained that. So I think we covered that that question unless she wants to add something, Ian.

39:13 No? No. I don't I don't think I think that means tape out rather than take out. So Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Okay. So, yeah, I I think we covered that. So so, yeah, tape out is the, you know, the the tooling for the chip before it goes into production. The 20,000,000 US take out contract appears to have contributed $8,800,000 to financial year twenty four revenues, but has reduced the gross margin. Is the remaining half of this contract still expected in financial year 2025? And would it also be lower gross margin than your other in our eSupply consultancy business? I'm not sure exactly which one is the 20,000,000 US take out, but I think I know.

40:05 And I think half of the revenue was generated in in in financial year 2023 and '24. And then there's a portion in 2025, but it's it's it's coming towards the end of that contract and going into the the supply side of it, I believe. Yeah. That's correct. Yeah. Yeah. K. The the we we we hope to see the upside from that in terms of the the supply coming through. In the section outlook of the accounts, the phrase additional external finance may be required should the company experience further delays in contracted customer receipts.

40:51 Does that mean customers have cash flow problems? No. It doesn't. I think I mentioned before, we we we had some delays in signing contracts, which has impacted our cash flow. We expect to to recover the the the contract receipts from customers, and we are also expecting to sign new contracts, which which will further bolster our our cash position and give us headroom. K. I think we covered my phone. Your report refers to the opportunity for an health care ASSP, but state that a lack of capital is holding this back. Do you plan to address this capital issue?

41:42 I mean, not not not directly. I mean, we see that, you know, we will be cash generative, and then, you know, we can we can use that cash to, invest in, you know, invest in that product further. I said, our focus is, you know, is very much on, you know, generating more products that drive more near term revenue. So what is the value potential value of the IP licensing contracts? I mean, it's not a focus for us. We develop IP. That IP has a value, and, you know, we will, we'll license that IP to other semiconductor companies that, we consider to be non, noncompeting.

42:29 I mean, things like the the post quantum cryptography, the license fees for that are, you know, are very high and, you know, almost one, you know, one license will pay for the development, and we still have that we still have that IP to use in our own products and and license again. So not not a focus for the business, but, you know, we we, you know, we do, you know, we do assume a few, a few licensing projects where we, you know, where we will license our value by IP to other semiconductor companies. It appears that some NRE supply contracts may have been delayed or contracts moving into the supply stage on schedule. Is this time scale defined by contract, or is it at the customer's discretion?

43:18 So I would say that any delays have been more in the signing of the contracts and concluding negotiations. Usually, as soon as we sign the contract, the the the customer would have liked us to start the the NRE work about two two weeks ago. So so that usually moves forward quite quickly. We haven't seen any any delays in terms of chips moving into supply. These are as per forecast, and our our forecast for 04/25 is is currently in line with with what our expectations were at the start of the year. Strengthening position, but no reference to profit.

44:08 So we we reiterate our our guidance of of 30,000,000 of revenues and and and 5,000,000 of EBITDA, and that that should translate into a a a profit after tax for for our investors. Can you give more details around the comments, Ari, h two bias for 2025? What are the key factors? So so we expect our revenues to be second half weighted. This is in line with the prior year. And the factors that drive that is when we sign the contract. So you will have seen a lot of contracts have been signed over the last three to four months, and the work on that is now starting.

45:07 When we get to the second half of the year, those are expected to be in full flight, so we see increased revenues in the second half of the year. L and B are forecasting supply revenue of $16,000,000 in financial year 2026. Please could you give us a feel for what you hope supply revenue to get to over the next three to five years? Oh, putting ourselves out on a limb now. But I think I think probably the answer is that that we we expect revenues to double in financial '25, and then we expect them to double again in in '26, all things being being equal.

45:58 I would hope that in five years' time, I think, as mentioned before, between three and five years, we would we would hope that supply revenues are anything between 50 to 75% of our overall revenue. So so becoming much more of a part of our of our a main part of our our revenues, which gives us good cash flow generation, good profits, and allows us to really think seriously about where can we invest to further shareholder value. How can you get on top of delays in contracted customer receipts?

46:43 I think, as as I mentioned before, the the the the the main issue is to to sign the contracts as as quickly as possible, And I don't think we've got a a problem with with getting receipts in. It's more in in signing those customers up as quickly as possible and managing how we are how we are seeking out the payments. It is a negotiation with the customer, but I do think we we mostly are able to achieve good results for the company. Although sometimes we do have to meet the customer in the middle in terms of how big of an upfront we are able to get at the start of the contract. We we'd always like it to be as big as possible, but sometimes we have to take a bit of a smaller one.

47:39 Can you explain what is the meaning of the scary going concern financial statement? So again, as I said before, our auditors look at things on a downside scenario, say, so they look at the case in which something goes wrong with a customer and, for example, they do not pay. That is not what the board believe will happen. We believe we will we will generate the customer receipts and recover those, and we also expect to to sign up the new the new contracts that will give us the additional headroom. So the board fairly believes that we will not need to raise funds and that the company is in a in a in a healthy operational position.

48:29 Can you describe the difference between NRE and consulting exactly what were IP sales in the financial year, and where is it placed among the three revenue line items? I I can, explain the difference between, you know, n NRE. So NRE stands for nonrecurring engineering fees, and that's the fees that we charge a customer for, developing a chip, which later leads into to supply revenue. So that's made up of the the the cost to the people and things like licensing third party IP, e EDA tools, and the masking of the chip, which is the the tape out that we talked about. We're consultancy is where we work for semiconductor company and basically charge our time for helping them develop develop the chip. So the the the NRE one is the one which is the sort of the the the key the key focus, and that leads to, you know, as I said, the reoccurring supply revenue.

49:37 In terms of where the the IP side is relatively small. I think it's in the in the in our e the in our e section, but I would just need to confirm that. Yeah. So had you are not able to go after all the business out there, would you not be better selling yourselves to a much larger company? Shareholders have not benefited since IPO. I mean, we we, as as the directors and the board, we we believe in the value of the company. We think that as a a stand alone company, the the company's base better place to deliver shareholder value.

50:29 We believe we are on the road to to delivering that, and and we do expect that as as we get more chips into supply, as we win more in our e contracts, As those supply revenues increase, we should see some some the share share price go up together with that. We appreciate it is a journey, but we do think that there is an enormous amount of potential benefit in the company. So from our side, we see that as the greatest benefit to shareholders. The second Siemens contract was contracted was stated in today's r and s as valued at 2,500,000.

51:17 Is that figure correct? No. I don't think so. No. I I don't think we've Right. Released we stated the value of that. No. Yeah. When are you forecasting that the company will be increasing the net cash position each month? So we expect that during the beginning of financial year 2026 is when we will start generating positive operational cash flows. What exactly is the current fully diluted share count?

52:06 I believe that is in the financial statements, but I could not tell you offhand. Likewise. Can we expect any director purchases in the in the near future? Again, I don't think that's an answer I can tell you on this call, but I wouldn't be surprised if if if that takes place in future. But there hasn't been an LNB broker note this morning. Are they still covering ENSILICA? The answer is yes. They are still covering, and I expect that they will they will send through a note in the coming days or weeks. I can't exactly say when when that will be, but but we do expect that to come through.

53:00 Yep. I was briefing them this morning on Yes. Yeah. So it it it will be out shortly. Is the beamforming a proprietary to the customer or something you could market? What band does it work in? L band, a, k u, something else? Okay. Okay. So in terms of the the RF chip, which which is actually an RF beam former is is Ka band, but we are also looking at other bands like Ku. The the the the beam former chip, which forms what's called a hybrid beam former, is sort of a digital chip. So it does digital beamforming, and that is sort of agnostic to the band. So that will work with with with different bands.

53:57 I think we're starting to come to the end, so probably maybe last two questions. Sorry. And I think this one might be efficient. You've mentioned new contract wins which use the ARM ISA. In the long term, it looks like RISC V will gain significant traction, not held by ARM versus Qualcomm. So I wonder if any of your customers are asking for RISC V cores and how well positioned the company is to benefit from increased risk b adoption. Yes. Yeah. I mean, we we've done risk risk five designs in the past, so, you know, we're very familiar with integrating different types of microprocessors. I mean, we're, you know, we're we're agnostic, but there's no doubt that, you know, in in applications such as automotive and industrial, ARM is the, you know, ARM is very much the the market, market leader there. But but, you know, we're I mean, as I said, we're we're very well prepared. We're, we are an ARM, an ARM partner at work with them actively, but, you know, we are we are CPU agnostic.

55:12 So one more. Is your US consulting firm managing to attract new US investors? So we we are seeing some traction on that, and we've had we've we've had some some investors from The US. It is still early stage, but but we hope to see some some some further traction on that and and be able to provide positive news. So I think we're we're we've come to the end. Thank you very, very much, and I'll just hand over to to Ian to give the last the last concluding comments. Okay. Thanks thanks, Christoph.

55:57 I would like to thank everyone for their interest in the company, and there are a lot of people who have been following us very closely. We've had a, you know, a a very good year, and we've started this financial year well. I mean, you saw that the, the NRE is up, which means that, you know, that's driving the the number of chips that, we're developing that are gonna go into supply production. So this business model, we have the sort of fabulous chip business. It's not a new model. It's well proven to deliver, you know, shareholder returns. So, you know, I'm I'm very pleased with the, you know, the the the way we're moving forward on it. Thanks. Thanks very much. Ian, Christoph, thank you very much for updating investors today. Could I please ask investors not to close the session? As you know, we automatically redirected to provide your feedback in order the management team can better understand your views and expectations.

56:48 This will only take a few minutes to complete, but I'm sure we'll be greatly valued by the company. On behalf of the management team of ENSILICA PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.