Oxford Metrics (LSE:OMG) — Interim Results

0:00 Good morning and welcome to the Oxford METRICS PLC Interim Results Investor Presentation. Throughout this recorded presentation, 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 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 will review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Nick Bolton, CEO. Good morning, sir. Good morning, and thanks, Alessandro.

0:33 And welcome to OXFORD METRICS interim results for the period that closed at the end of March twenty twenty three. And indeed, when we presented the full year numbers at the back end of twenty twenty two, we talked about the year ahead being a year of opportunity and growth. And, well, six months into that process, I'm really pleased to report that's exactly what is coming to pass. There are three big headlines in this set of results. Firstly, this is the highest ever revenues nearly half, first or second, 16,300,000 in h two last year was the previous best. And importantly, this proves that we can really scale production to meet the demand that we're seeing. The second big headline is that we're seeing continuing ongoing strong demand across verticals and also across geographies.

1:21 And David in a moment will provide a bit more color to that. And then the third big headline is that the M and A pipeline is building well, and there are early signs that private, business valuations are starting to move towards where public company valuations, are now set. So a year and a half into our five year plan, I'm pleased to report we're definitely on track. So in terms of the structure of this presentation, I'm going to hand you over now to David Deacon, our CFO, to take you through the financial performance, and I'll then update you on pro take the baton back to update you on progress as to the five year plan. And lastly, we'll look forward with the outlook for the business for the for the rest of the year and the years ahead. So without further ado, over to you, David. Thank you, Nick. I would also like to add my welcome to this morning's presentation. So kicking off with the financial headlines.

2:10 Starting top left, overall revenues at $21,300,000 were up 69.6 year on year. And adjusted for FX underlying growth was nearer 62.5%. The order book as at the end of March stood at 22,000,000, up from 9,000,000 compared to this time last year, and we report a statutory, PAT of 3,200,000, up from 600,000 a year ago. Middle left on an adjusted basis, which excludes noncash related items and exceptional costs, a profit of 4,100,000 is reported, up from 300,000 last year. During the course of the presentation, I will explain the bridge between last year and this. This represented an adjusted EPS of 2.64p, up from 0.41p a year ago.

3:00 And the cash position at the end of March stood at £63,600,000 which is after payment of the final 2.5p dividend, equating to an outflow of GBP 3,300,000. During the first half, 900,000 was invested in new IP, which actually represents a decline compared to last year's GBP 1,200,000. This is due in part to last year, including Valkyrie, and this year, including slightly more focus on new product research, which does not qualify for capitalization at this time. The inventory position at 6,400,000 is more than double this time last year and is also compared up to is up compared to last year end at 4,500,000. Given the strength of the order book, we took a proactive decision to carry more inventory to underpin the level of expected second half shipments.

3:51 This was the primary reason, but the additional inventory also has a secondary benefit providing some protection against unforeseen supply chain disruption. That said, compared to last year, the situation is now much improved. The increase in inventory largely accounts for the decline in the 67,700,000 cash position, compared to last year end. So now let's take a look at h one trading performance, starting with revenue, which I'll look at in three different ways. First, historical. So as Nick said, the first half performance at 21,300,000 is the best ever half performance. It is worth noting this did benefit from the carryover of 3,500,000 that we were unable to ship in late f y twenty two due to US supply chain constraints.

4:36 But ignoring this for a moment, the revenues would still have been a record in any event. So looking briefly at revenues from a geographic perspective, the standout performance is clearly Asia Pacific, accounting for 43% of revenues in the first first half. Of this, Japan accounted for nearly half of these revenues together with strong performances in China and in South Korea. All of these markets reflected a strong appetite for the new Valkyrie camera in the buoyant entertainment segment. Whilst there's been a change in the overall mix, there has been growth across all the markets when compared in real terms. So in the on the on the right hand corner, USA up 46.9%, and Europe up 24.4%.

5:22 And thirdly, let's look at revenue from a market segment performance. So entertainment was the strongest segment, nearly trembling revenues year on year. And really, this came as no surprise given the entertainment bias in the opening order book. That said, engineering, life sciences, and location based entertainment also reported, growth. So moving to the right, the order intake during the half, was 19,800,000, which after shipments meant the order book as a whole remained at a similar level, compared to last year end. And the order book at 22,000,000 is perhaps a little more balanced now compared to last year where there was that entertainment bias. So the engineering order book includes our largest ever deal we mentioned at the preliminary results.

6:10 Entertainment remains buoyant at 8,100,000, and life sciences also has a healthy order book of 6,100,000. Looking at some of the segmental highlights in the first half. In engineering, for example, the University of Manitoba acquired a very large Valkyrie system for both unmanned aerial vehicles and ground robot tracking in their indoor facility. Their studies aim to increase the capacity in research and skills training of UAVs and robots to help the local agricultural industry further embrace these technologies. And in in entertainment, cover studios in Tokyo implemented a new state of the art studio using 200 Valkyrie cameras, which is being used for a wide range of content production, including V Tubing.

6:57 And in life sciences, Victoria University based in Melbourne added 40 Valkyrie cameras to an already large Vicon Vicon system capability. This is an enhanced tracking means that the university has become the first official FIFA Research Institute for foot football technology. The university first collaborated with FIFA in 2016 when it developed an innovative international standard for FIFA's quality program to to assess the accuracy of electronic performance tracking systems. And in the LBE segment, customers have been calling off against existing orders, and many of our customers have ambitious rollout plans over the coming years. But at present, the current order book of 640,000 probably does not reflect the potential and has more to do with ordering patterns in this marketplace.

7:50 Sandbox VR recently announced the opening of their thirty seventh facility in Kentucky, and Immersive Gamebox is expected to be at 46 active, facilities by the end of this year. Based on the future rollout plans, which are publicly available on their respective websites, it does suggest there is promise of meaningful growth in the future. So together with Dreamscape and Hollowgate, we believe we have all the main runners and riders in this market. So if the segment does take off, we are definitely in a good place to benefit from this. So so far, the focus has been very much on revenue and order books. So now, let's take a look at the adjusted PBT. And to do this, I've prepared a waterfall. So on the left hand side, you can see the adjusted profit of 300,000.

8:36 And then moving to the right, there's a 100,000 adjustment, relating to applying current FX rates to the outcome. So it would have been slightly enhanced. Gross margin generated by additional revenues added 6,100,000 to profits from which have trimmed around 200,000, to reflect a slightly lower gross margin percentage arising, from the mix of direct and indirect revenues. Compared to last year, the cost base is up, in part due to some inflationary increases, rising from payroll changes we made last Christmas to address the so called cost of living crisis, which we did wait in favor of our more junior and lower paid employees. But for the most part, the increase, is all around the planned organic investments described in the five year plan.

9:26 The focus of the team is on product research at the moment, working on new technologies to drive revenues in the future. More of this from Nick in a few moments.

9:36 This also meant that r and d capitalization in the first half was 300,000 lower, whilst amortization increased by 0.4 following the launch of the Valkyrie camera in FY 'twenty two. And finally, interest received added another $500,000 And taking all of those things together, we arrive at our adjusted PBT of $4,100,000 for the first half. So in summary, the strong reported revenue performance is backed up by a healthy GBP 22,000,000 order book going into the second half and a significant adjusted PBT performance of GBP 4,100,000. A strong cash position of 63.6 and an improved dividend as well. So in summary, the business is in a good place to move forward with the five year plan.

10:26 Before handing back to Nick, I'd just like to take the opportunity to remind retail investors that further information is available on our website, www.oxfordmetrics.com, where you will find some updated research prepared by progressive equity research, which includes, forecast numbers for this year and beyond. That's it for me. Back to you, Nick. Great. Well, thanks very much, David. I'd like to pick up the baton now, really, and talk about, the five year plan, what that means in organic terms, what progress made on the inorganic side, and then really, move forward and look at the outlook. So starting, first of all, with just a reminder of the current five year plan. This was the new plan that we launched in October 2021, so we're now eighteen months into that. And it really recognized the the area of expertise that we have is in this area of integrated smart sensing systems, where if you've seen, this presentation before and a chance to view some of those videos that David was talking about that are available on our website. What we mean by integrated smart sensing systems is that we look after the data from the moment it's sensed all the way through it to it delivering, delivering actual intelligence when it's applied to the market. So we break that down to these three phases of sense, analyze, apply. And our our thesis is, and we've demonstrated this both in the growth of Vicod as well as of Yotter and of two d three. If you look after the data across its full life cycle, you end up with more valuable, more powerful actionable intelligence at the end of that chain.

11:56 So the five year plan recognized that that was our area of expertise, and we then set about, through an organic and an inorganic investment plan to drive that growth. And through that combination, really what we're trying to do there is expand the market applicability of our deep IP and, therefore, the addressable market with the aims that over the five year period, it would increase revenues two and a half times and deliver a 15% return on adjusted PBT level. We really expect that growth to be divided about fifty fifty between organic and inorganic. And so that we're using three specific growth levers to expand that solution applicability that really break down to each of those areas of sense, analyze, and apply.

12:41 So the first of those is about extending our sensing capabilities to adding new and different ways to sense in order to then have that sense information in leveraged by our existing investment in our analysis software. The acquisition we made of iMeasure U a number of years ago, a New Zealand business that had expertise in inertial sensing was exactly from that playbook. So that's the first growth lever. The second then is about enhancing the modes and the capabilities of our our analysis phase. Now there's what other what other analyses could or analytical tools can we provide to better understand that sensed information? And, actually, on the organic side there, the acquisition of Contemplus, a couple of, summers ago, was exactly that. Their expertise in being able to sense and measure from, playing video is another example of, their expanding our analysis capabilities.

13:34 And then thirdly, it's about seeing our IP embedded in other companies' solutions, and the location based entertainment is the most advanced example of that. As already across the five year plan, our aim was to step up investment to drive those levers across the business. And now we're in year two. It's a useful time to take checkpoint where are we with with each of those tools. So let's start off, first of all, looking at the organic side of the investment. And, really, as David's already pointed out in his waterfall side, this is fundamentally about a target investment in r and d. Sure. We've made a few investments in and around sales and marketing as well, but fundamentally, what underpins the, the plan and driving this, increase in, TAM expanding capabilities, it's about the careful investment, in r and d. That specifically includes continued investment in AI.

14:29 And given that that's on, everybody's lips at the moment, I think it's worth just taking a sidebar on what's, what what's OXFORD METRICS, involvement in AI. Well, the first thing to say there is it's not new to us. You know, we've been in AI for many years, both at a research level and also, in product. In fact, if you if you're one of our entertainment customers using our Shogun product, the finger tracking capability that's inside, Shogun, which shipped, I don't know, four years ago or so, is all driven, by a net that's been trained on more higher fidelity finger information so that you can now drive a fully articulated finger model with just three markers on the hand. So that's the first thing to say is that AI we've been in AI for many years. And I think the second thing is really is that we see ourselves as beneficiaries of AI of a broader AI adoption really for two reasons. First of all, it drives sales, especially in the engineering segment where a lot of our engineering customers are building robots or testing robotic capabilities.

15:31 And it's not just in engineering, but also in life sciences. In fact, the image on the very front cover of the of the slide deck that was was there is actually a picture of Tonal, which who are a US based business who are building an AI powered home gym. So if you like a a Peloton, but for resistance training. And they have a a significant investment in a Vicon system in order to really develop their products to build the datasets upon which they can then train their own device in and around their AI system so that it can offer better advice to the athletes who are training using their equipment. And it's not just that example. It's, as I say, it's across a a wide variety of robotic implementations. And, actually, David's example of the University of Manitoba is exactly one of those. So that's the first thing is that we'll be beneficiaries because it drives sales. The second thing is to us, it opens up new market opportunities for our own application of AI.

16:31 So that that's putting that then to one side then, the sidebar on AI. Where are we investing in that r and d? Well, mostly, we're working on extending, the sensing capabilities and enhancing the analysis side. But those are initiatives and less so on the, on the applied phase, less so on the embedding. And those initiatives are spread across all of our vertical markets, definitely in entertainment and life sciences and also in engineering. And more than that, actually, it's about adding new capabilities that will see us be able to add additional verticals, on top of those. We've added to give you an idea of the scale of that investment, we stand at just under a 170 people today. We've added 23 new r and d heads since the start of the five year plan. And that's really to capture the opportunities that we see, ahead of us there.

17:22 And I think, really, it's worth understanding there that the this the the large proportion of those r and d heads are really working on new TAM expanding capabilities as well as though adding a few of the heads that are working on enhancing our existing products aimed at our existing markets. And, actually, I think the thing about the strong order book of course, the strong sales performance in the first half is it really reflects our our historic successful capability to invest in in r and d. And this r and d investment on the organic side is really playing is coming straight out of that playbook, and we're really looking at to drive the business onwards into years three, four, five of our five year plan. So that's the growth drivers on the organic side. If we turn then to what we're undertaking on the, acquisition side.

18:16 And here, the three, growth drivers all count again, the extended sensing, enhancing analysis, and the embedding IP. Our focus on m and a targets is is consistent with where we were six months ago. You know, we're looking for businesses that are IP rich, that have got deep tech, that have got large moats based on that technology, that have got attractive cash flow metrics, clearly, the fundamental assessment of valuation perhaps in any business, ones that offer us good to high revenue visibility to augment the strength of our existing revenue streams. And we're also looking for companies that have got able management teams who want to join our project and collectively combine to achieve more than either can achieve

19:02 alone. Our goal here is to identify latent talent by the fair price and then improve through a combination of, innovation, technology synergy, and also commercial synergy. You know, can we bring effectively, more technology to sell to our existing, market with the 10,000 customers in 70 plus different countries. Can we broaden our product catalog to sell to that audience, or can we leverage our existing sales channel in some way or our back office capability? You know, we have a a direct subsidiary in The States. Can we effectively bring products through that existing channel or through that back office? And, equally, are there areas of technology synergy? Can we bring our capability with dynamic metrology, with three d understanding to have perhaps more static or more two d capability within there? So through those synergies drive out greater value.

19:52 We've got offer multiple integration choices. So that could be an acquisition that's deeply integrated into the existing subsidiary, partially integrated existing subsidiary, perhaps where we might share an r and d capability or a

20:05 back office, an HR, or finance capability, or equally sit as a completely standalone, subsidiary reporting into groups. So that gives us a bit more flexibility about the, the targets that we can look at. So we're focused very much on the markets we understand, the entertainment, life sciences, sports, and engineering marketplace. And over the past six months, that's really developed. So we've now gone from filtering hundreds of long list opportunities now to a defined target list of around 50 specific companies based

20:37 in The UK, Europe, and North America. And we've now got ongoing engagements with a number of those targets, but at different stages of of maturity. I think one one thing that is worth commenting is that private market valuations are starting to normalize with public company multiples, which, of course, is what we need if we want to show you know, deliver an earnings accretive deal, which is very much on our minds. I think it's also worth stressing here is that they've got to be the right deals. David went to a board meeting recently and coined the phrase that the acquisitions need to be the right ones for the right reasons and and at the price. And so, that absolutely, underlines what we're looking for here. We're looking for those right businesses, and we've got to make sure that we pay, the right, price, securing the value at the point of purchase rather than on some sort of mythical plan to drive value that that comes out afterwards.

21:38 So those are the threads then, the the organic investment to drive the five year plan, the inorganic plans to to drive the growth. Now let's move forward then and and look at the outlook for this for the second half. Well, first of all, as David's pointed out with the order book there, we've got full visibility of h two revenues through that order book. But more than that, and perhaps where, David, my focus, mostly is is looking at that sales pipeline. You know? And, actually, there, we've got a

22:08 very, encouraging ongoing sales pie pipeline. And so we expect to enter next financial year with a with a strong order book, position. So the the what that would then mean with our full order book is that we, expect the second half revenues to be to show growth year on year. So last year was 16.3. We're expecting a second half to report growth on that. And then looking at the five year plan, we're continuing to invest on the organic side to drive that five year plan in and around the r and d function. And now valuation metrics are starting to normalize. M and a is a key focus for this management team and for the business more broadly. But underlying that the acquisitions need to be the right ones and clearly at the right at the right price.

22:55 All in all, what that means is that we're well placed to deliver performance ahead of the market expectations. And if you've been following any of the analysts, you can see they will uptick our numbers for for the full year.

23:09 So in summary, this really was a great first half. It was the best half in the company's history with strong revenues and strong market demand. And it's also one of m and a progress, really, that puts us well on the road to achieving our five year plan. So indeed, as we said back at the Christmas set of results, we expect this to be a year of opportunity, and growth. And now we've made a great start to fulfilling this promise to be that year. Thanks very much, for your attention.

23:41 Nick, David, thank you very much for presentation. What I'll do is I'll just bring your cameras up now. 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. But just while the company take a few moments to read those questions that have been submitted, I'd like to remind you that recording of this presentation along with a copy of the slides and the published Q and A can be accessed via your investor dashboard. Nick, David, as you can see, received a number of questions throughout today's presentation. If I could just ask you to read out those questions and give responses to it as appropriate to do so, I'll pick up from you at the end. Okay. Well, what a great lot of questions. First of all, thanks for so much engagement from from you all. Let me pick off there are a few in here that relate to competition. So I'm going to be pick off a few of those.

24:29 And, clearly, we're talking here in the context of Viacom's competitors. So the summary really there is that, first of all, we have two principal direct competitors, Qualysys of Sweden and Optatrack in The States. Qualysys, we mostly see in Europe and in the life sciences market. Optatrack, mostly in The US, in entertainment market. Optatrack themselves are actually owned by a Chinese conglomerate called Layard. And in both of those, we haven't seen we've seen a, you know, consistent level of competition from them. We like competing because we

25:04 know that we do head to head with our product. We have enough features within our product to be able to differentiate against those. So we've really maintained and grown our market position against those. We also have a series of indirect just to pick up a question that again came up on the list there, a series of indirect competitors with different or less accurate or lower cost capability. So on that side, someone's mentioned Xsens. They make inertial suits.

25:35 So you still put on a Lycra suit. You have these inertial sensors in there. There's also another business called Rococo who make those inertial suits. We tend not to see them in our deals mainly because the that has a different characteristic out the the noise characteristic and the accuracy characteristic in there, but they are they're valid solutions within the space. And we also there are some video sensing VC smaller startups who are also going after that that lower end market. But, really, it's the direct competitors of Qualysys and OXFORD METRICS that we see most frequently, in, in deals, and we really do feel we have a differentiated solution that means we can compete, at that level. So, hopefully, that covers a number of the questions that people have been asking on the competition slide.

26:24 David, is there a finance question there you can see you'd like to pick up? Yeah. There's several along similar lines. So I've been asked, you know, could we see a special dividend or a share buyback? And in another question, really relating to, you you know, the number of deals and the size of deals that we might do. You know, would there be, you know, further returns? As Nick said, you know, our main focus at the moment is finding, you know, accretive acquisitions. And, of course, doing acquisitions is not always an exact science. You know? We can't predict precisely when those things might happen. But, really, the short answer to to the question is that, you know, if at some point in the future, if we find we're unable to deploy some or all of the cash, then we certainly would consider, you know, a return to, you know, to shareholders.

27:19 I'd have to say probably more inclined to do it, a return by way of a tender offer than a special dividend, But, hopefully, that just covers off two of those questions. Great. Let me pick off this one on the list here that's what are our thoughts on the Apple announcement last week and how does OXFORD METRICS benefit from it. Yeah. Last week was a pretty pretty big week news in in three d, and I do think the Vision Pro is a really interesting device. I mean, absolutely laden with technology and leveraging a lot of the things that Apple are amazing at. So because they've got that incredible capability, you know, in the silicon side all the way through to the application software, it means that they can actually bring a high degree of innovation into that device. So I think that coupling of processing capability right alongside a sensing capability, which they then tout the very low latency, will be key in in solution spatial computing. So I think as three d professionals, the first thing the r and d team were were impressed with the capability of the device, although we don't get invited to such press launches, so we haven't actually had a go with one. I think the thing to say about what it means really for us is that, pretty much any any expansion of ways to consume three d content or or create three d content, which clearly the Apple device plays to, is is generally of a benefit to

28:50 OXFORD METRICS. You know, we saw that with the VR headsets that were coming out of Oculus.

28:55 Clearly, we saw that out of the headsets that then drove the location based entertainment business. And actually, we're seeing it within some of our industrial customers and also university customers with the existing Vicor business. So I think overall, there's a clear net benefit there to to OXFORD METRICS. And I I know that our development team wants to get hold of one of those devices as soon as possible. So, hopefully, that covers off your question, Any more finance questions there, David? Would you like to There's one here from Vishal thanking thanking me for the financial detail provided and commenting that over the weekend, you know, various, short term saving rates have been announced, you know, approaching 5%, and so forth for the next, eighteen months.

29:44 The question is, are you going to park part of your cash to generate a decent return on that capital as well? Well, that's that, you know, that really is my goal is to try and optimize, obviously, the the amount of income that we can earn on the cash. But at the same same time, I'm simply not gonna take any risks with that cash. You know? I feel very responsible and custodian, if you will, for the monies that we've got available. But through our existing arrangements, I'm already getting, you know, pretty attractive rates. And the other balancing act that we need to to achieve is that, obviously, Nick and I are privy to, you know, our our m and a objectives and what might or might not happen. And so therefore, structure our deposits in such a way to give us the flexibility and availability of cash, you know, so we're in a position to execute and should we need to. So, yes, I'm I'm doing my best and looking to optimize rates at the same time as trying to give us the flexibility that we need.

30:46 Great. Thanks, David. Paul, I'm gonna pick up two questions in around sort of market development. Paul's asked, does TAM expanding mean total addressable market? Yes. That's that's why I'm using the term TAM. And all of our initiatives really on the on the r and d side are all trying to expand our capabilities so that we can reach a large a large audience. So that's what we mean by TAM expanding. Also had another question from about there's been a high level of female sports injuries this year. Have you seen an increase in the sports science and biomechanics side of the business? Yes. There there are and and there are a significant number of clearly high profile female athlete injuries over the past twelve months. You know? England's being deprived of a number of their best players going into the Women's World Cup in Australia, New Zealand late later in the summer.

31:40 And I think that's a great shame. We've always been very strong in sports science and biomechanics. And so inside sports science programs, like they have up at Loughborough, probably is The UK's, you know, the largest university on sports science side. They have three Vicon systems that they use that have been applied to a wide variety of sports. And then then, of course, in countries like Australia, the Australia Institute of Sport has systems. As David mentioned, the Victoria University of Melbourne has just got this fantastic accolade by being the first university to be in FIFA's to be to be FIFA's approved group to assess player tracking systems. You know, when you see the pucks on the back between the shoulder blades of rugby players or Aussie rules players or or football players, they effectively, it's a system that's assessing the accuracy of those, but now based on the FEAF standard delivered by Victoria University of Melbourne.

32:38 So biomechanics so sports science biomechanics has always been very strong. I do think there needs to be more progress made on female athlete understanding, And I think that's been overlooked in so many ways. So, you know, it's only recently that even football kit has been stuck to be cut for women, specifically rather than just borrowing the men's kit. And there was also a very interesting business I came across who's now making a football boot, a soccer boot, if you like a football boot, that's being designed specifically for women to try to avoid anterior cruciate ligament injury. So definitely an area of focus and really should be good for for us. We're strong in that space, And the more research that goes on in sports science and in biochemical mechanics more broadly, the the the good news it is for Baikon and for OXFORD METRICS.

33:26 David, is there anything else on the finance side there? No. But I'm happy to most of them look like this there for you, but I'm happy to take the one from James v. You comment the level of visibility over the Bicon order book is unprecedented. What problems and opportunities does this visibility create for you? Are there any capacity issues? Well, you know, Nick and I are really pleased to be where we are in terms of having the order book. And having that visibility really does provide, you know enables us really to plan in terms of production and supply chain and so forth. So I'm struggling to think what problems there might be other than perhaps customers have to wait, obviously, a little longer than they used to. But have that said, you know, buying patterns and behaviors have changed.

34:15 And quite often, orders are in relation to, you know, much larger, bigger projects. So I don't think that's a huge issue. And then in relation to capacity, well, we were really pleased with the performance of the team during the first half, and it really demonstrated that, you know, when when the demand is there, we can respond to that. So there are there are no capacity issues that that that raise their head. So but overall, it's a huge opportunity for us and is a much better way to run the business going forward. Yeah. Great. Thanks, David. We've had a question from Dhruv about can we give us a sense of how big Qualysys not track are? How big are the markets that we compete in? It's clearly hard to get up to date information from one's a private business, and the other one is a small division in a massive Shanghai listed conglomerate.

35:12 So trying to get clarity on on the revenues that the others are doing. The the best way to really think about it is the overall size of the market because we know which deals we're in. We know which ones we win. There are a number of deals we also lose, so we're aware of those two. And in invariably, our estimate currently is that the overall is about a $100,000,000 annual market within that space. In other words, we've got, you know, with the order of about 50% market share within that. I mean, clearly, with different different penetrations in the different vertical markets. So hope that gives you some scale on that. I'm also gonna pick up another question. Vishal's asked us with the move into analytics and sensing, is there an opportunity to get some ARR revenue into firm probably via inorganic focus too?

35:57 I think there are opportunities. So thanks for the question. You know, o over overall, our aim is to increase the visibility of our revenues, within the business more broadly, both on an organic side and an inorganic side. That said, it's easy to look at the vehicle business and think that it's it's just a capital goods model, but it's worth remembering that 80% of our revenues in any one period come from existing customers. So in other words, there's a higher quality there because I know the telephone numbers of 80% of where the deals are gonna come from before we even start the period. But, no, we're definitely interested in driving a greater visibility from the from both the existing business and also then in the new lines.

36:46 And as we develop those and as we announce those, you'll see some of those things come through. The other thing that's worth last thing is worth saying on the inorganic side, you know, we're not afraid of taking on a buying a business that's perhaps sold in an on prem perpetual basis and transitioning helping transition them to a more of an ARR business. Michelle, I think you might remember that we we bought a business called Mayrise that for the yacht of business, and we did exactly that too. And given our capital capability, that would seem like a good use of capital to help improve the visibility over time. So if that covers your question. David, is there another finance one there? Yeah. William d's come back, so I've I've failed to cover off another point he made. And this is really in relation to, you know, would we consider carrying debt on the balance sheet?

37:36 And if so, what level of gearing interest cover would you be happy with? Well, I think it's a short answer at the moment, you know, given the, you know, cash that we have on the balance sheet, that is sufficient really to, you know, expedite our plans from a five year you know, achieving the five year plan goals. So I think in the short term, the the short answer is is is no. But never say never, I guess. But, really, the cash we have is more than sufficient, you know, to execute our plans. Okay. We had a couple of other questions following up on the the points you made about AI, which I would just like to pick off. So how will AI affect your business? And then there's a question around datasets as an enabler of the of the marketplace.

38:23 Let let me pick this off. So the key thing to remember about AI is it's not just although, key, large language models or large multimodal models, which are very popular in the GenML space, right now and are very impressive, or coupled with the diffusion, nets of where you're getting images generated or videos generated. So things like stable diffusion, DALL E two, mid journey, those are all good examples of that. So, clearly, that's sort of the GenML side. That's all relatively new. Now AI stretches stretches back thirty years. In fact, so the biggest breakthrough in computer vision was the invention of convolutional neural nets about, what, fifteen or thirteen years ago. And it's on the basis of those or both, you know, supervised learning models that really enabled us to do the finger tracking model and and actually add other capabilities to even the way we calibrate cameras.

39:22 So the thing to remember about AI is it's not just it's not just the general side. There's already great, fantastic practical solutions out there that are already embedded in our solution and also provides us an opportunity to bring further innovations to market. And coupled with that, just picking up another question in and around datasets. So you may or may not know that you broadly need two things for delivering some AI capability. One is some approach to an efficient algorithmic approach, and the second thing are the datasets by which to train those nets and those systems on. So datasets really matter. And, clearly, we do sit on, the the the the fact that our systems are used for capturing, datasets, is key to driving the adoption within those, robotics, companies. And, also, we do sit on a fairly deep pool of our own datasets gathered over many years, and not just in the point data, but also in the biomechanical and bone data that that underpins those.

40:28 So datasets are are key, but, of course, it's all very well having a a functioning inference system. We also then need the customers and the distribution system and the support structures and the all of the other practical tools in and around those AI tools in order to make sure it delivers real benefit to the to your end use case. And, of course, Vicon and OXFORD METRICS have got that in spades and and a great deal of experience. So I think we're very well placed to leverage that. The only thing I think we perhaps should have done is to put more AI stickers on the boxes so that people understand we've been in the market for for a little while. There's one other question here because I think we're down to the last couple now. There's a question around the metaverse growth and what role can we play in that growth.

41:17 Clearly, the metaverse is a very means lots of different things to lots of different people. It's definitely driven the adoption of some of our solutions in in the space with the games companies who are building persistent three d worlds that people can go and attend to. It also is used as people divide devise devices to access the metaverse like the Oculus headset or the Vision Pro headsets. They're often buying Vicon systems to act as ground truth systems so the engineers can, get an accurate fix on, where where the actual headsets are. And, equally, it's driving out LB location based entertainment innovations like a sandbox and immersive game box, which which otherwise wouldn't be capable wouldn't be possible without the expansion of the metaverse and the tools to build those metaverses with.

42:15 I think, overall, the metaverse has got a long way to to run yet. But I think whichever way you look at it, again, as the ways to consume or create three d content, expand, metaverse being an example of that, those are only good for OXFORD METRICS and, and for Vicon, a world which we've played in for for many a long time. One thing we talk about in a couple of the videos online is about how we've always sat at this interface between the real world and the virtual, you know, between the analog world and the and the digital. And, actually, if you then think about what the metaverse is, it's about effectively sitting at exactly that interface. And given that's where our our near on forty year of of experience is, I think we're very well placed to to realize growth from that from that initiative.

43:06 Last couple of questions. One is how long does your IP last last for? I think that's right. I think it might be a typo of the question. How long does the IP last for? Well, it all depends. You know, in lots of ways, Vicon Vicon is a very well engineered system. So in other words, it's there's not it's not based on one single piece of science that we've then got patent protected, really. It's a series of improving the weakest link in the chain over that thirty nine years worth of development. And so, actually, within there, I can say there are some aspects of the techniques that effectively were established in the eighties. But, clearly, since then, the the efficiency and the effectiveness of those capabilities have been vastly improved through constant innovation.

43:58 So, really, we really do feel that our IP is this is this foundational rock upon which the the business is built. So definitely built to last, and I think we'll carry on being built to last in the future. And then the last question is around immersive. I think it's it says immersion leisure franchises. How does OXFORD METRICS plays into this? I think the question might be around immersive game box, unless there's another company called Immersion that I'm unaware of. I'll answer the question about immersive game box. They've got a really exciting rollout. They're supposed to be up to 46 sites by the end of this year. The the management team there are the management team behind Tough Mother, the the assault course business.

44:53 They're very well funded by Index Ventures, and they're really going places and expanding. So each time they roll out a new site, they place an order on Vicon as we order the core technologies upon which they they rely. And so that's the final question. Thanks very much for it. Nick, David, thank thank you very much. I think you actually manage address all those questions from investors. And of course, the company will review all the questions submitted today and we'll publish those responses out on the Investor Me company platform. But just before redirecting investors to provide you with their feedback, which I know is particularly important to you both, Nick, could I just ask you for a few closing comments? Sure. Well, clearly, you know, through the presentation, also through that Q and A, I hope you can see that the company is in very, very rude health. It's in it's in a very strong position.

45:42 You know, that's our strongest ever trading performance in any half. We've built a fantastic order book through that first half that we can now deliver into the second half. And we've made real progress on the m and a side. So, really, when we talk about opportunity and growth at the start of the year, that's exactly the world that we're we're delivering. And then going forward from there into years three, four, five of the five year plan, I think we're really set to exceed to achieve some exciting growth on top of that already existing strong growth. So thanks very much for attending this morning, giving up your time to spend with David and myself, and actually, more importantly, for your ongoing support of our business. Thanks very much for your time, and have a great day. Thank you.

46:27 Nick, David, thanks once again for updating investors today. Could I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views expectations. This will only take a few moments to complete, and I'm sure it'll be greatly valued by the company. On behalf of the management team of OXFORD METRICS PLC, we'd like to thank you for attending today's presentation, and good morning to you all.