Ensilica (LSE:ENSI) — H1 Results

0:01 Good afternoon, ladies and gentlemen, and welcome to ENSILICA PLC investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged. They can be submitted at any time via the Q and A tab that's just situated on the right hand corner of screen, please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today, and we'll publish those responses where it's appropriate to do so on the investor meet company platform. Before we begin, I would like to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And I would now like to hand you over to the executive management team from ENSILICA PLC. Ian, good afternoon, sir. Good good afternoon, and well, welcome everyone to ENSILICA's interim results. That's for the period ending the 11/30/2023.

0:54 The usual disclaimer, and I'll just move on to the introductions. I'm Armin Lancia, CEO and cofounder. My background, I'm an electronics engineer. I started my career at at PLC radar working with the defense sector, and I moved into semiconductors in the the mid nineties working for Hitachi. So I subsequently not yet. I I I founded ENSILICA in 2001. And in 2016, I I met Mark who who joined us to help us with our growth. And I'll let Mark introduce himself. I am a graduate of Manchester University and a chartered accountant. I was

1:35 formerly a partner with both Grant Thornton and Ernst and Young, but left the profession in 2005. I've been CEO or CFO of a number of engineering businesses since that time, including as well as the public listed CFO. Okay. Just to sort of summarize, ENSILICA, as I said, we were established in 2001 initially as a a consultancy for helping companies develop develop ASICs. So our clients include companies like Nokia, our previous employer, Dialog Semiconductor, Wolfson, Panasonic, and Sony. So in in 2016, I I I worked with Mark to change our my our model to one of the fabless ASIC company. So so in this model, the the design cost, that's the cost of developing the ASICs. You will hear refer to that as the NRE non recurring engineering costs are shared with the customer.

2:32 But unlike consultancy, you get a a reoccurring long term revenue stream through selling the chips as they as they enter into production. So so today, we have three chips in the supply stage. One one of these is an ASIC for a high end vehicle that started production in 2022, and the anticipated revenue on that is 40,000,000 over over six years. And and we also have six chips in the design stage.

3:00 We so sorry. Seven chips in the design stage where it's, you know, they they will start production from sort of 2024. This includes an industrial ASIC, which will launch for production at the end of this year with anticipated revenue of of 30,000,000,000 over seven years. So in terms of the business model, it generates long term reoccurring revenue from the development of of selling these chips. Near near term cash flows, we we still use selected consultancy work

3:34 to to to help the near near term cash flow. So here are the half the highlights from the half year results. Revenues are up 11%, is broadly in line with what we're anticipating. Operating profit is down compared to last year, but that reflects quite a significant amount of investment that we made the year since last year. Last year's first half results were the first half post IPO. And since then, we've invested heavily in sales and marketing and also, research and design, and that's that's the reason for the fall in the profitability. And it's the same reason it gives that the EBITDA is low. But as you can see, profit after tax is higher, 60% higher.

4:19 That is a consequence. That also reflects the investment we've made in new business because we have to treat the R and D tax credit from HMRC on the tax line, so it becomes below the line, and that was, 2.2 sorry, one one point four for the half year this year, and that is why, the profit after tax is so much better than the operating profit. And as a consequence, impact on EPS, of course. And, the cash at the end of November was 2,100,000. Cash, last night was just about a million pounds. So current trading, as I've just said, revenues were up 11%, and the growth was across all revenue streams, which I'll go through in a little while.

5:06 During the year, we had two NRE projects that went through the tape out process. That's the process at the end of the design phase before, we go into supply. It's important to be aware of these tape outs. We're a relatively small company still, and they're quite big lumps of, revenue, and they tend to depress the margin. Although, as you'll see in a moment, the margin is up, but nonetheless, they do get depressed a little bit by a take back. That's an impact that will not affect us so much as we as we get larger. But I'm pleased to say that we're getting some history now, and we can report on annual recurring revenues. And we expect annual recurring revenues for the current financial year to be £12,000,000 and last year, it was £6,000,000 During during the during the period, we won a couple of supply contracts, plus one upgrade of the contract, and they were worth $57,000,000 in in terms of order to or future order work.

6:05 And I wanted to say, and we need to report that we're trading in line with market expectations for financial year '24. The outlook is good. Activity is very, very, very good. We're getting a lot of inquiries. Revenues are ramping up. Supply revenues are increasing. We expect annual recurring revenues to increase and even commensurate with the economies of scale. Committed future annual revenue recurring is now valued at 73,000,000. And importantly, our pipeline, which includes opportunities as well as orders, is now $512,000,000.

6:49 So looking at the income statement in a bit more detail, as I've just said, the revenues are up 11%. We'll look at the revenue streams in a second. Gross margins have improved. That's after the impact of of the tape out, which I mentioned on the previous slide, and the impact on operating profit compared to last year is, as I said before. Interest is still a burden. We funded the business from 2018 through to IPO with a debt package. It's an unsecured debt package. It looked quite expensive at the time. It doesn't look quite so expensive today with the increase in interest rates, but that's why we have a relatively high interest charge. The tax credit represents, the benefits of the r and d tax credit scheme, and we've I've talked about EBITDA and three eighty five already.

7:41 Split of the revenues.

7:44 You might expect the chip chip supply revenues to be higher in '24 than '23. In actual fact, the first half of twenty three was still impacted by COVID, and we had a number of customers who were ordering ahead of schedule, so that inflated not only our working capital because debtors went up, but also our revenues. That's normalized now, and and the lower number is still reprimanded growth on what we consider to be the core core contracts that make up our supply revenues. NRE is is increased. That reflects the increasing amount of work that we're doing for new customers. And when we come on to look at the balance sheet, you'll see that our investment in in new work is increasing quite quite nicely. So the total revenue from our fabulous model is, is up over the year, which is what we wanted to see. That's what we focus on. But it's also important to recognize that, consultancy revenues have held up very well.

8:40 We don't actively go out to develop this business strategically,

8:45 but as Ian said in the introduction, we've got some very high quality customers who have used us for many, many years, they keep bringing us up, asking us to do work. And it's useful for us because in working for other people, we learn new IP that we can incorporate into our own IP. So it allows us to develop. It allows our staff to have exposure to different methodologies and different ideas. So we think it's worth continuing with the consultancy. It also is relatively low. It doesn't consume much working capital, and cash flow is benefited. It also smooths out the business. The supply business, when you buy small, is quite lumpy, and the consultancy revenue smooth it out somewhat. So looking at the balance sheet, and you can see on the right hand side at the top what the intangible assets were in May at 12,400,000, and they're now at 15,200,000.

9:43 Sorry. And, that represents a 50% increase on investment, in intangible assets from last year for the six month period, and that reflects the large number of interested parties we've we've now attracting and asking us to do study work or even to start new work on a new chip. Cash is better than this year than last year. Last year's cash was impacted by the increase in working capital consumption of working capital due to the unusual buying patterns of our customers. We squeezed £1,600,000 out of working capital during the period, which allowed us to improve our cash position. Our debt is reduced. We continue to reduce the debt that we I relate I mentioned earlier by about 600,000 in the in the half, and that that will continue.

10:40 Net debt is net debt has increased mainly because the cash balances this year and have have changed. So cash flow, you can see the profit for the period of 515. Cash generated from operations, 2,200,000. That reflects the the squeezing out of working capital of about 1,600,000. The tax accrual for receipts this year is 1 0.4. This half year is 1,400,000. And so we we're generating net cash from operations of 3,600,000. And it's important to recognize the importance of R and D tax claim in this. Our business model is based upon, that process continuing, which it seems to be doing.

11:29 There's no hint of it not being continued. Although I can tell you that they are very slow in paying the tax credit. We've not yet received the tax credit for for

11:38 last year. I think that's that that's finished that slide. Okay. Thanks, Mark. I'll just touch on some of the sort of key key opportunities we've got going ahead, particularly design and supply. So just as a a reminder, of, you know, design and supply is where we have the the the NRE, the design cost funded or not funded by the customer, and then then we get long term revenue from the from the sale of the chip. We've secured a a study phase for a very high volume industrial ASIC.

12:15 The contract, as I said, is material. It replaces an existing chip with with no volumes. So the the customers funded us to do the the study phase, and ENSILICA has previous sector experience. So we believe we have a good a good probability, very high probability of winning winning this material contract. So we've we've also entered into a binding letter of intent, you know, subject to the contract completion later later this year for a telecommunications infrastructure, I say. Again, this is a material contract with a lifetime value of 35,000,000. The RNS for that went out in in December, at the end of December, probably the worst the worst days ever for being recognized by the market.

13:04 And, again, the design costs are funded by the customer. So both of those very significant strategic design and supply supply projects.

13:15 So we move on to another one, which is supply only. I mean, we talked about design and supply, but when when a customer actually develops a chip, they don't always have direct direct foundry access. If they're not used to taping out, they would go through what's called the channel partner. And ENSILICA is now established as a channel partner for one of the large fabs and a a large US electronics company. We're very close to being

13:43 selected for for for that and doing the the manufacturing services related to to supplying the the wafers. It's a material volume, albeit lower margins than if you've done the design and put tightly in it. But there's some very there's some upsides on on this, you know, it will open business to other other work, particularly in The United States, and we also expect it to improve our margins on on our design and supply chips because we're we're increasing our way for purchasing power, you know, it will strengthen our position within the supply chain and within that fab. So so all in all, you know, very positive and, you know, that will drive drive revenues '25, 2026 and beyond.

14:34 Just some business we've got with existing customers. We talked about the automotive chip that went into into production in June 2022, just after we IPO ed. That's for a higher than 24 chips per per vehicle in one particular model. In the in the following May, we announced that we had that chip design into existing models. So that so that increases the rep the revenue expectations for that chip for 40,000,000 over the the coming six years. So this does require us to further invest in the supply chain and actually, you know, increase our, particularly, our testing capacity to move back to the to have increased capacity in the fast the Far East. So there'll be an investment which is about reducing the tech the the test time, which is the test cost, and that will improve our competitiveness on the on on that particular chip as well.

15:34 We talked about the channel partner status with the with the foundries. You know, now now ENSILICA is a foundry partner. This will enable us to execute, take out of wafer business with our existing customers where where where they may be using other other methods of accessing accessing the foundry. So this will will really help our service customers and and add reoccurring revenue elements on some of the service ones through through wafer supply or even even full supply.

16:13 So Mark talks about design services and the significance of that. I mean, we have a significant design service project, at $3,800,000 with the European industrial semiconductor company. We're all we've we're already working on the the study phase to define the chip under submitted the proposal. And and this is not only design services, it's also

16:37 encompasses IP licensing within that as well. And moving on to our IP, I mean, we have a strong IP portfolio that really addresses our our focus segment. So that includes cryptography, and I mean cryptography is one of those those areas which goes across multiple segments, including automotive, industrial, and communications. They're all things that need cryptography. So we have an idea of cryptography area, radar, particularly focused on automated radar, health care, and communication systems. We we IP the life we license the IP to semiconductor companies, but we also leverage the IP on our supply ASICs, making us, you know, more competitive and actually showing our you know, that we've got a key differentiation by being able to supply the IP ourselves.

17:29 So we've you know, as an example, we recently licensed our post quantum cryptography IP, PQC, to a world leading semiconductor company. And this

17:40 is a pretty key IP, and this this is a new version of cryptography, which is designed to be robust to quantum computers. And, you know, we expect to see other licenses for that for for that IP in the in the future.

18:00 I'll hand it to Mark to do the investment. Yes. So in summary then, our investment case is that we think we've delivered good financial and operational growth since the IPO. We could always do better, but I think we've done pretty good. We beat the plans that we had at IPO. We've successfully engaged across the automotive sector, the industrial sector, health care and satellite communications. The business model we've got, the ASIC supply model is is a proven model and is now scaling, and we'll see an increase in recurring revenues over the coming months. And it's underpinned by our own IP and by current project project revenues that we've secured. The management team is experienced. We've got lot of people who have been doing this for a very long time, and we're set to accelerate our embedded growth strategy.

18:50 The further development of our significant pipeline and order book is is imminent and is now valued at $512,000,000. So that's the that's our update to you all. I'm very happy to take some questions. Perfect, Mark. Ian, thank you very much indeed for your presentation this afternoon. If I may just jump back in there before we move to questions. Ladies and gentlemen, please do continue to submit your questions just by using the q and a tab that's situated on the right hand corner of your screen. But just while the team take a few moments to review those questions that were submitted already, 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 your investor dashboard. Ian, Mark, as you can see there in the q and a tab, we have received a number of questions from investors during the call.

19:38 And thank you to all of those on the call for taking the time to submit their questions. But Ian, Mark, if I may just hand back to you just to read out those questions and give your responses where it's appropriate to do so, and then I'll pick up from you at the end. Thank you.

19:50 Okay. Well, the first question that's on the list is as follows. With the market being focused on artificial intelligence, is this an area you will be developing with your chips?

20:03 I'll that one. Yeah. I mean, very much so. I mean, obviously, NVIDIA has been in the press. I mean, shares are very, very strong there. So NVIDIA are really based on cloud cloud based AI. So that's where, you know, you you you have your AI computing power in in server rooms, but there's a whole area of AI really called AI at the edge. And what what we're seeing now is really chips which are at the edge, which they they need a combination of mixed signal sensors for sensing the real world, but also, you know, digital AI agents for for making artificial intelligence machine learning based decisions. So those those AI chips that are being used at the edge, I mean, they need, you know, they need machine learning accelerators, and that and that's a whole area where you're using ARM for

21:02 using IP from companies like ARM, you know, incorporating those in the in in the chips to to to allow them to be AI AI ready. And and it's important that they have the the computing power at the edge because, you know, for for applications like automotive, industrial, you know, you can't always rely on getting the connectivity to to to the to to the cloud, and they also need to make these decisions in in in real time. So, you know, a real opportunity for us, you know, and one we're we're well equipped to to play to play at. The next question is from Marcus A, and the question is, What are the key strategic goals for the next twelve to twenty four months, and what KPI should I use to measure progress?

21:52 I think the answer to that is our primary strategic goal is to increase recurring revenues,

21:59 so look out for contract wins that increase recurring revenues. The reason why that's important is as we improve that, we will generate more cash, and we will be able to fund our own development there. So focus on the winning of new supply contracts and on maintenance of the gross margin, which we hope to improve above the 43% we've reported today.

22:26 The next question is from Harvey r, is how much of the $512,000,000 is contracted?

22:33 Currently, about a just under a $100,100, million dollars is contracted. The second question the next question is also from Javier. How much investments in working capital would you need to deliver this? Well, as I mentioned before, we won't take all that work on. That's the work that has been brought to us that we will assess. Our model is based on working on two new contracts a year, so we won't overwork those contracts. But we think that we have got sufficient working capital to be generated from our supply revenues to be self financing, from the back end of twenty four, early twenty twenty five.

23:18 But if if it's it's difficult to be specific about how much working capital because it depends how much of that is NRE, how much is funded by the cuss the customer, and how much of it is supply revenues. It's it's it's something that's under constant review. The next question is from Andrew M. With contracts and opportunities across different regions regions, how do you manage regulatory, currency and operational risks associated with international expansion? We're talking with well, I I like how we've we've we've been doing, you know, majority exports since, you know, since we started. So I mean, we're very used to dealing with, you know, with currency risks and, you know, in international in international trade. So, you know, I mean, it's not it's nothing used to us. Some of that, our main currency for most things is is US dollars as as as you see, and we even we even quote our pipeline in in US dollars.

24:19 We also take a lot of advice from professional firms about tax planning and regulatory advice. We've got lawyers in each of the countries that we do business in that can be can can assist us in supporting that. The next question is from Harvey R, and the question is, can you give us a bit more detail on the quantum of the late cash payments for the tax credit, etcetera? So I can. The the gross tax credit from her majesty's his majesty's Red Marines customs was 2,100,000, which they have not paid. We have financed part of it, but there's a shortfall of about 700,000. In addition, we've got two customers that have not paid.

25:06 One, as a consequence of the war in in Gaza where the company is having difficulty getting hold of the dollars to pay us, and the other one is because they're waiting for a a European Union grant. So that's the nature of the difficulties. We the difficulty with the tax credit was really that the government, the in in land revenue did not tell us that they thought there was a problem with our claim. They told us three months late if we'd have known in a in a in a shorter time frame, we could have dealt with it. In actual fact, there was nothing wrong with our claim, and it was their error in assessing our claim that was wrong. We've checked that with our professional advisers, a company called Latens who've been working with us for fifteen years. We've never had a claim rejected or questioned before.

25:58 We've remonstrated quite hard with HMRC and are hopeful of receiving the cash that they owe us in the next two or three weeks. But it's it's been very annoying. The next question is from Rob b, and it says, hi, guys. What proportion of your revenue relates to consulting services? Is that likely to be a key component of revenue going forward? Thank you. So we think the revenues for consultants and service this year will be about 8 to 9,000,000 out of a total of 22,900,000, so it's about 40%. But we we anticipate that that number will stay the the the revenue line will stay level for, consulting services, 8,000,000 or 9,000,000, but it will gradually become a smaller and smaller proportion of our total revenue.

26:52 I hope that answers the question, if I don't mind taking a follow-up if you've got one. The next question is from Harvey. Has the commercial ramp of Starlink been a catalyst for others to invest? Yes. Yeah. I mean, I mean, very much so. I think what what Starlink has really proved is the need for robust satellite based, yeah, broadband connectivity. And and, I mean, that's both for government usage, but generally across the board. So, certainly, the, you know, the EU are investing in one called Iris Squared, which is, you know, their own constellation. I remember people are probably all aware the UK government invested in in one way, which is now merged with another company, and and there are other constellations as well. So and satellite communications, one of the one, you know, one of our focus area. We've got a lot of core IP there. We've been backed by the European Space Agency and the UK Space Agency to develop some differentiated technology in that area.

27:55 So so so, you know, definitely as a a a you know, people are investing in these new constellations where, you know, we're well placed, you know, as they roll out to to be shipping the, you know, the chips that they need. Next question is from Steve B. What is the time frame from initial initial phase to real revenue real revenues? I presume by real revenues, you mean supply revenues. Do you wanna answer that? I mean, the the Yeah. Yeah. Mean, certainly, I said, I mean, we we you know, we've started supplier revenue, they, you know, they they they lack the design design revenue, you know, depending on the project by by by two to five years. So, basically, we started this you know, we we we started this this business, this sort of supply business in 2016.

28:48 We we had our first contract 2017, 2018, and they're in you know, they're reaching supply now. And, you know, we see sort of, you know, 2024 and '25, you know, is where those seven chips we've got in the in the in the design stage and moving into supply stage. So things will things will really ramp up in those in those years. You'll you'll see from Allanby's notes that '25 revenue the revenues for 2025 next year are just over 30,000,000, which is a significant increase on this year's twenty two point nine. The next question is from Harvey R. We haven't got a breakdown to hand of the £512,000,000 opportunities pipeline, but we're happy to provide that at another time.

29:44 So I'm sorry. I can't I can't answer that at the moment. Yeah. Yeah. Yeah. I I mean, I I I can just comment. I mean, they're very you know, terms of, you know, telecoms and automotive, industrial, probably the the key as a fairly e equally split between between those three, slightly lower on the on the on the health care the health care side. So but, you know, those are the three sectors I mentioned. We've got very strong opportunities in those in those areas. Next question is from Steve B. And the question is, does AI impact on the design time frame? I mean, not from the point of view of the I mean, of the hardware. I mean, in terms of adding machine learning engines, there's there's existing IP in there. So, you know, in terms of people add AI capabilities into chips through either a machine learning engine or through actually having a what we call GPU accelerator on the chip, general processing accelerator similar to those that would, you know, video, imagination, technologies, etcetera, would would do. So, you know, it it doesn't take any longer to implement AI functionality into into chips.

31:07 And then second question we can't answer that question. I'm sorry. Okay. So and then there's further further question from Steve B. When do you see the group becoming cash flow positive? Is another fundraising anticipated? Well, you'll have read that we're looking at doing some work in capital financing at the present time, and obviously all options are always on the table. But we see the group becoming cash flow positive around about twelve months from now. We've got a big chip going into supply back end of this year, early next year, and that will change the cash flow profile quite significantly. Okay. Another question from Steve B. What gross margin do you anticipate on supply contracts? It's variable, but we're aiming for a 45 plus.

32:03 It tends to be lower to start with, and and we can wrap it up as we go along. The margin you see reported today is a is a blend of margins from supply consultancy and NRE. You just scroll down. Yeah. The the next question is from Tom L. And the question is, does family partners taking you overseas, e. G, The USA, reduce your requirement to hire hire sales staff in the territory? I mean, in The US, we have we have sales reps there that are very experienced in this area, and, you know, we we have we have offices in in Brazil, and we can support that in The UK. So there there is no plan to put direct sales staff, you know, particularly particularly in The US at the moment, we we believe we can support those opportunities from the time zones we know, we're already working and using our sales reps.

33:06 This is a question from Bob L. Can you please update us on the investment technology priorities of your target and existing customers? How has the semiconductor prioritization of AI affected customers and competitors, including any impact on pricing pressure? That's a big question, Bob. Yeah. I'm not not sure how to answer that one, but, you know, the I I said that I I mean, in terms of chips chip functionality, I mean, you know, AI is another feature, having AI accelerators. So, you know, it it does technology node that it goes on. So you you have to you know, the AI is quite memory intensive. It's quite logic intensive. So you end up having to move into newer newer tone known technologies, things like sixteen and seven and seven nanometers.

34:04 So that increases the the the investment the customer has to make in in developing in in developing a chip. Probably hasn't answered all the aspects, but, you know, that that's the interesting side of of AI. And, you know, we we have the capabilities to to design these advanced node technologies, both on the digital side, but also on the the big signal and the RF RF side, which is a a key differentiator for us. Next question is from Gary R. How are you finding recruitment to suitably qualified engineers to support development of your chips? Getting good engineers is all you know, it's it's always been a challenge, but, I mean, we're you know, we're we're we've got a very strong graduate program working on where we're looking to bring in, you know, fresh talent out of universities.

35:00 And we, you know, we we are based in you know, the The UK. We've got location in Brazil and India. So, you know, we we are we are feeding through, you know, qualified engineers through the through those locations. So we're we're we're you know, I mean, we're fine at the moment, but, you know, we we we need to work hard our our staff or our our our key assets. Next question is from Dan R, and it is regarding the IP licensing component, do you expect IP licensing activities to grow in addition to the fabless chip design activities? How important is it to the overall growth strategy? I mean, it's not a key part of the the growth strategy. I mean, we we have a large portfolio of IP, and some of that IP, we make we make available for external external licensing.

35:55 I mean, we we have other elements which would be harder to support that we don't offer for for licensing. So, you know, if I remember from the correct from the Allan Green note, it was about sort of 200 k last year's relatively small amount. But I mean, particularly with some of the the unique IP we've got, you know, I I can I can see that increasing, but it's not a strategic it's not a strategic focus? But but but it's, you know, it it's all it's welcome high margin revenue. From Bob L. How do you prioritize your limited engineering resources? Do you regularly turn away consulting projects to ensure enough capacity for fabulous revenues?

36:41 Has the recruitment environment improved given the distress of a peer? Okay. What did say? Yeah. I I mean, generally, you know, the semiconductors were down last year. I I think about 10% of this sector, but, you know, has softened the the the demand for engineers as a lot of the bigger companies have some some cutbacks. But, you know, the the the, you know, the the the estimate is gonna be up up this year, which may may may increase the demand for for for engineers as it sort of tends to it tends to feed through. So we, you know, we do look at the consultancy projects very carefully and and look at ones that are, you know, either with strategic, say, strategic IP partners where we can learn about their IP and do it all or in their, you know, in particular areas where where we believe we can offer some real value and even bring in our IP into the into the consultancy plan. But I obviously, we can we we do prioritize the fabulous revenue business. We are looking for reoccurring revenue as a in terms of putting our engineering resources onto projects that generate reoccurring revenue.

38:05 The next question is from Sats P. What are the biggest risks to your business in the medium term? Well, we do a lot of work with Taiwan. The geopolitical state across the world is a challenge for everybody and is therefore, by definition, a challenge to us. We've already addressed or spoken about the need to recruit people. But to be fair, the recruitment of good engineers has been a problem for ten or fifteen years. That's not that's not a that's not a new risk. I think that that's probably the yeah. Yes. Yeah. I mean, people you know, different people have different views on the the risk that Taiwan yeah.

38:57 Taiwan plays in in its but, you know, in terms this, it's about, you know, the the probability of that yeah. It it it's about the probability of that, and we we consider that quite low. I think you are talking about the medium term. I mean, if the medium term is three or four years, then there will be alternative foundries outside of Taiwan that we will be able to use. The next question is also from Steve B. And the question is, for new contracts, how many years would you generally estimate it takes to then generate supply revenues? One, two, or three years? I I yeah. I'm gonna invest in two years. So if if there's, you know, existing product, very clear design, then for the design and supply, it's two years. If the design's already done and talked about that supply only one, that can be really, you know, generated within the the next year. We're you know, I mean, the automotive market is generally slower, and that that could be in excess of sort of three three three years. But from, you know, from from a design win being announced to supply, you know, supply revenue, it it will be two to three it will be two to three years.

40:17 The next question is from Gruff w. When do you expect to receive delayed payments from customers? To be honest with you, in the next two to four weeks, we would expect maybe sooner. You can rest assured we're on it all the time. The next question is from Steve b. If you only take on two new contracts each year, will this not constrain growth? Well, won't constrain growth. There will be growth. It'll just be measured growth rather than explosive growth. If you take on more contracts than that, you run the risk of not having the engineers to do the work, so you've got to do it in line with what you can foresee in terms of your capacity and how much you can grow your capacity.

41:03 We took on one and a half comp contracts so far this year, depending on how you measure it. With a bit of luck, we might do three next year. I think two is our target. It doesn't mean to say we'll only do two. And if we can grow the engineering base, we could probably do more, but you can you can go too fast at these things. This is a question from Tom Hell. Oh, this is for you. K. What nanometer is your new industrial ASIC that is moving into supply? Yeah. That is forty forty nanometers per year. It's quite a, quite a mainstream technology. The next question is from Bob L. Is growth currently constrained more by sales capacity, engineering capacity, or financing?

41:54 Probably what we have noticed in the last few months is people are taking longer to place place an investment decision. They're still placing the decision, but it takes rather longer. So if that's what you mean by sales capacity, then that's a fact. And financing is an issue. We IPO ed in 2022 asking for £10,000,000 worth of equity. We still haven't raised £10,000,000 of equities despite asking for three on three occasions. So, if a if a very large chip came along, and last year, we did we did get involved in a bid for a very large chip, would have been $200,000,000, which we walked away from because we didn't think we had enough working capital, and we thought it would be too difficult to raise the working capital. So at some point, financing will have to be an issue, but we work on the presumption that if we get an attractive enough proposition, then the market would be happy to support us.

42:56 I don't think so. That's I think if you sorry. The question is from Steve B. Today's announcement says that the current market for ASIC is 1,600,000,000, growing to 25,000,000,000. Is there a typo? I I think below that paragraph, there is a link to where we got the story from. So I think it's it's referenced there. Like, I'm pretty sure that that's that's what it says in the in the link from the independent organization that announced that. Yeah. I I mean, we would look at the ASIC market as being, you know, roughly 55% of the the total semiconductor market, which, you know, the semiconductor market is 600,000,000 at the moment, you know, growing to a a trillion by the end of the the end of the decade. But, yeah, I I I mean, there's lot of definition about what what people consider an ASIC to actually be. So, yeah, we we we would look at it at, you know, five as I said, you know, it's 5% of potential semiconductor opportunity.

44:01 Think that's the last I think we've answered all the questions. Mark, Ian, absolutely. And thank you very much indeed for being so generous of your time there and addressing all of those questions that came in from investors. Of And, course, if there are any further questions that do come through, we'll, of course, make these available to you immediately after the presentation has ended. Just for you to review to then add any additional responses where it's appropriate to do so, and we'll publish all those responses out on the platform. But, Mark, perhaps before really just looking to redirect those on the call to provide you their feedback, which I know is particularly important to yourself and and the company, if I could please just ask you for a few closing comments to wrap up with, that would be great. Yeah. I'd like to say thank you to all those people, all those institutions, all those retail investors who have supported the company. We value your support greatly, and we look forward to those of you who are not investors deciding to invest in the future. Thank you very much for coming to today's presentation.

44:55 It's appreciated. Mark, that's great. And thank you once again for updating investors this afternoon. Could I please ask investors not to close this session? You'll now be automatically redirected, to provide you, your feedback in order the management team can better understand your views and expectations. This will only take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of management team of ENSILICA PLC, we would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all.