Transense Technologies (LSE:TRT) — Annual General Meeting

0:01 Good afternoon, and welcome to the TRANSENSE TECHNOLOGIES PLC Annual General Meeting. Throughout this recorded meeting, attendees will be in listen only mode. Questions are encouraged, and they can be submitted at any time using the Q and A tab situated under our hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company can review all questions submitted today and publish responses where it is appropriate to do so. I would now like to hand you over to Executive Chairman, Nigel Rogers. Good afternoon to you.

0:32 Hello, and hello to everybody. We have a few people in the room, one or two latecomers just coming into the room now. And welcome to everybody online to the annual general meeting of TRANSENSE TECHNOLOGIES PLC. I'll start off with some introductions. We have the board of directors in the room, myself as executive chairman, Ryan Moore, managing director, Melvin Siegel, chief financial officer, Craig Wilson, independent nonexecutive director, Steve Parker, independent nonexecutive director. And for the next fifteen minutes or so, Rodney Westside, independent nonexecutive director. Many of you will have known and met Rodney over the years. He's been a nonexecutive director of the business for many years, predating me on the board as well. But we welcome him today for his last day of work with the company.

1:22 Rodney is stepping down in the conclusion of this annual general meeting, and we'd like to take this opportunity to thank him very much indeed for his sterling service over the years. He's seen a lot of changes in the company during the time he's been here and alongside me has provided tremendous amount of support to me as executive chairman since 2020, particularly in the early days post the Bridgestone deal is starting to reshape the business, and I'm extremely grateful for the time and effort and skill that he's brought to that. Thank you very much, Rodney. Yeah. And what we propose to do is to take you through the trading update, which was announced this morning at 7AM in advance of the meeting, open the meeting for questions. We'll then take the business through the resolutions, hopefully fairly swiftly.

2:10 I have proxy voting in advance of the meeting. Approximately 19% of the ordinary share capital has been voted by proxy, and of those proxies received in excess of 99% have been in favorable of the resolutions for the votes cast. We will publish on the company's website full details of the proxy voting of the completion of the meeting. First then, let me talk through this morning's trading update. It covers the four month period ending 10/31/2024, so the first four months of the trading year since our last year ended June. Since that period, overall revenues have increased by 48% compared with the same period last year. Included within that increase, the Bridgestone iTrack royalty income has increased by about 23%, and the combined income from TRANSLOGIES and SourceSense, the two operating businesses of the company, has more than doubled since the comparative period last year. Gross margin of the business is stable at above 85% of revenue.

3:13 We have been investing in increasing the headcount of the business. It's increased to just over 30 now compared with only 18 people a year ago. So that's an indication of the level to which we are now starting to build out a team of engineers and salespeople to be able to support the business development activity that's underway. As a result of that increased overhead, net profit compared to the same period last year is up by 10%. Within TRANSLOGIES, our in house production move from the third party supplier who has supplied TRANSENSE for a number of years is now complete, and that has been very successful from our point of view in terms of being able to get better control over our production and also reduce our unit costs to be able to provide us more flexibility on pricing in the marketplace.

4:01 The extension of the range of TRANSLOGIES products is now underway, and we have completed a software partnership which enables us to now look at a combined hardware software subscription model to be able to sell a turnkey solution to those tire customers of ours who don't have their own software model. They're now able to access software through our model on a subscription basis, and we have a number of customers on trial using that model at the moment. Within Source Sense, the two government funded projects, LandOne, where lead partner is Airbus, and Pulse, where the lead partner is Protium in electric automotive. Both of those projects are now underway. Grand claims have been started, and we also have a number of customer funded projects at various stages well underway also.

4:54 In order to be able to fulfill the capacity to meet those demands, we're continuing to recruit within the engineering team, and we have other key recruitments underway at the moment. At the end of October, the cash balance of the business was £1,720,000 compared with 1,280,000 at the end of June, so business continues to be cash generative in order to be able to fund our future investment plans. And, accordingly, the directors believe the company to be well placed to meet market expectation in f y twenty five and optimistic for prospects of the business thereafter. And if you would like to access market expectation for FY '25, there is a link off the company's website to be able to see published research by Allender Capital.

5:40 So that concludes the trading update.

5:47 I'd now like to open the meeting to questions, either in the room or any questions which may come in online also. I'll take questions in the room first. Can I ask a question then? Of course you may. The the cash balance you gave, I know it sort of comes in lump in a rather lumpy amount from bridge Bridge s. Bridge s. Does that include a lump, or is good. At some stage, you get you get over a million pounds coming in at once. So Yes. The Bridgestone royalty is collected quarterly, and it's one month in arrears at the quarter end. So October 31 would include banking the quarter ended September royalty.

6:35 So it would tend to be cyclically on on a quarterly basis somewhat higher than the quarter end. We haven't actually put a November number into the market domain yet because it's not I don't know. I'm sure which the end of the month end yet, so we can't put that into the month. You don't have a time machine. No. I'm I'm hesitating to give a number, but I'm not going to. Thank you. Further questions in the room? Okay. Let me just look online then. Nicholas s, how long do you think it will be until we get a store production deal within a year or longer than that, say, three years? Thanks, Nick. So perhaps might ask Brian to take that question. Just due duration between development projects that are underway now and likely start of production.

7:29 Yeah.

7:31 So there's a there's this pipeline that we need to go through with a customer project's progression going from feasibility studies through to engineering design in and then ultimately into production. Those projects can take from, you know, two two to three years for more kind of consumer type products up to as much as maybe ten years for defense and aerospace type products. So the point at which you the point at which you know you're going to go into production though could happen much sooner. So, you know, the the customer is obviously committing expenditure along the way, and, you know, you need to have visibility of whether the project is seriously gonna go into production or or not.

8:28 We we've we've broken these phases down into a number of steps,

8:34 and we do have customers where we're, you know, fairly close to getting the sort of commitment out of them that this is a this is something that they will take through to production. So, you know, in terms of you could answer the question. It will be three or five years, but actually, we will have visibility of that sooner. I thought you were looking to say within this year, but, you know, that that may happen. K. Thank you. We did also discuss in the room, just in the room up to the meeting, but, you know, in the event that something is specified to go into production, then it's likely that that would be an announceable event. And if the customer was willing to enable us to provide full details, then we would. If it was under NDA and we weren't able to do that, then it would be anonymized.

9:22 But it would would likely be an announceable event if significant. It's probably also worth mentioning the MELOGIES presentation that's on the website, which shows the different stages and has some of the time periods that we would expect. Yes. Thank you, Melbourne. That's a that's a good point. For those looking online, there is a link to the MELLOGIES presentation on the investor presentation section of the website, and that includes process a chart that shows each of the stages of development and how long that's likely to take and what sort of revenue might be generated per project. Moving to the next question. What was the most exciting thing over the last year for each of you? What's been the most disappointing thing?

10:09 We'll keep it to business, I suspect. Yeah. I think, you know, to to answer that generically rather than going around the room and asking each director, I think, you know, it's very clear to all of us that there is a substantive momentum now in the progress of projects within the SOAR business. And I think, you know, not only the number, but also the quality of engagement and the intensity of the customers' involvement in

10:39 those projects is giving us more and more confidence that we have a long term sustainable and profitable business model, you know, way beyond the NRE stage that we're currently able to forecast going into the next decade. And and it's that which is really providing the board with the confidence to show the investment intention in the business that we're showing now, not only in increasing the size of the team and bringing in some very talented people, but also in investing in the fixed infrastructure of the business. We've made some very radical changes to the building here, but all of that is in preparation for further capital investment in production equipment and in our supply chain to be able to provide real tangible routes to ramp it up full volume production for our customers. And I think, you know, for me, that's been a highlight of of the last several months.

11:35 In terms of disappointments, I I certainly can't think of any, you know, lost business disappointment. If there is a frustration, I would say, rather than disappointment, it is that dealing with large customers, they never move as fast as we do, and they never move as fast as you'd like, but I've never been involved with an engineering company that wouldn't hold that to be true. Projects have a timeline to them, which, you know, invariably stays still or moves right and then never come forward left, and it would be nice if they would. Don't wanna add anything to that? I think there's two things to to into that. So the I think the quality of the customer base is extremely high, and their intent at even engaging, looking at the technology is is very encouraging. You know? I know it's hard I agree with Ryan. Hard to put a specific number on it. But I also think most sports engagement means highlighting because that's a very harsh environment, very critical environment assessing the technology.

12:41 And the momentum that's being built in the motorsports arena is very impressive and continues to build. And that will you know, that that is validating the technology, and it will give gives much more confidence that

12:59 production other production sources will pick up on it in time and pay for it. So for me, I think those two things are worth adding as well. Thank you, Craig. I have a question from Ben. What's the current position on hedging of the US dollar revenue?

13:20 Perhaps I could ask Melvin to take that one, please. Yep. We've hedged the initially, I hedged the first '2 quarters of the year. Obviously, the first quarter has gone through to September, and I'm hedged through to December. I have now hedged through to March 2025. And with the rates as it is, probably looking to hedge the final quarter of the year shortly. And the level that we hedge is around about 65, 70% of what we expect to receive. So we are covered to a large extent on any major fluctuations in currency. Thank you. And another question from Ben, which I'm gonna send your way, Ryan.

14:07 Within within aerospace, you previously mentioned a potentially significant aftermarket for repeat revenue streams. However, I understand that the benefits of SOAR in motorsport is durability. How does this square? So, actually, in in motorsport, we do the same thing and and for the same reason. So the main application in in motor racing is the gearbox input shaft. Our sensor is installed on that shaft. The shaft is made out of steel. It's very precision engineered steel component, and the shaft itself has a life.

14:48 So our parts could, in principle, last a lot longer, but the shaft is engineered to a a weight and a performance level that it it itself has a fatigue life. So in in motor racing, it's very common for the componentry on the vehicle to be refreshed because to finish first, you have to finish, you know, as the saying goes. And in an ideal world, there's a college chaplain saying that you want that perfect race car falls apart as it crosses the finish line. But the team Otherwise, too heavy. Otherwise, it's too heavy. So the teams manage that very carefully within their race programs, and, you know, they they they often have restrictions on how frequently they can replace parts as part of cost control measures. But typically, the the components that our sensors are installed onto themselves have a life and will be refreshed annually, at least annually. So, you know, IndyCar is a good example where every year we supply shafts to IndyCar because they refresh those parts to make sure they don't have a failure in a race. So that's so that's how that happens. In aerospace, it's very similar.

16:00 You know, a helicopter is designed to do a weight and to a performance level, and if it falls out of the sky, that's really bad. So things that could lead to catastrophic failure of an aircraft are designed to a life, and those lives are very religiously followed in terms of the maintenance of the aircraft. So the parts will be replaced on a systematic ongoing basis. So, know, you you'll see in the press about an airframe that's 30 years old or whatever still flying, but it's you know, every single component on it other than the shell of the airframe has been replaced. That triggers through. Triggers all through, yeah, multiple multiple times in that lifespan. And because our sensor is measuring the torque typically on a key component like main engine output shaft or the main transmission input shafts, if that shaft fails, it will be catastrophic for the aircraft. So they are they are replaced on a on a regular basis as part of that service.

17:00 Thank you. That's no further questions. Any further questions in the room? Yeah. I've got a couple. Ought to be able to calculate this, but I I haven't had time, and I'm a bit lazy. Have we got to the stage when the revenue from other than Bridgestone is is large than Bridgestone? It's looking at the it looks as though we haven't. But We haven't quite reached that point yet. I would look out for that in FY '26 forecasts. So probably gonna be in the marketplace soon, you you'd be able to see a trend there between '25 and '26. One of the key measures for us is the net profit minus Bridgestone royalty Yeah. Which shows us how much we're still continuing to invest in the business outside of how much of the Bridgestone royalty we're reinvesting in the business versus reporting

17:53 as profit, which will be available for distribution at some point. Yeah. And that's a key metric for us, and we're we're looking to bring that into the black by 2627. So this currently is probably we're to be around 18% of the iTRAQ income, the royalty income. Oh, thank you. And you said two questions. The the the one was and if you remember, you originally weren't going to do any manufacturing of parts, and, you know, I think you've come around to do some manufacturing now. But but the the SAW filters, are they all manufactured by you, or they you tell people how to manufacture them or what? No. Neither. So the the the two there's three key elements with the SAW system, two of which are very specialized in terms of the manufacture, but they're they're both made in semiconductor fab type processes.

18:52 So we we have an ASIC, an application specific integrated circuit, and that is made and packaged in a semiconductor supply chain. The SOAR element itself is a little bit more complex because it's a it's a very narrow supply chain for that sort of component. But but again, it is it is all done in a supply chain. We manage that supply chain. The components are made to our designs, but the the actual infrastructure of the supply chain is is in the supply chain. We we talked about this earlier. We're in effect, we are a fabless business for those components. So we will sell them, and we will supply them, but we we won't make them because of the requirements there. Thank you. And in terms of assembly capacity as opposed to manufacturing the components, then we'll have a pilot production line here, which is capable of building prototypes and pilot production quantities, and then that will provide a blueprint for customers to be able to replicate that in their own facility for full scale manufacture.

19:51 Thank you. Okay. I'm gonna move on to the formal part of the meeting then. So with your permission, I'll take the notice of meeting as read. The meeting, has 11 resolutions, and first of those is to receive and adopt the accounts. All those in favor, please? Any against? Thank you. I declare that resolution carried. Resolution two is to receive and adopt the remuneration report. This is an indicative vote. All those in favor, please? Any against? Thank you. The third resolution is to reappoint Cooper Perry as auditors of the company. All those in favor, please?

20:39 Any against? Thank you. The fourth resolution is to reappoint Nigel Rogers as a director. All those in favor, please. Please. Any against? Thank you. Resolution five is to reappoint Melvin Siegel as a director. All those in favor, that Any against? You didn't say please. That was just a slam dunk, that one. Resolution six to reappoint Ryan Moore as a director. All those in favor of that. Any against? Thank you. Next resolution is to appoint Steven Parker as director. All those in favor? Any against?

21:25 Thank you. And resolution eight to reappoint Craig Wilson as a director. All those in favor, please? Any against? Thank you. Resolution nine is to authorize the directors to allot shares up to one third of the net ordinary share capital, net of treasury shares. All those in favor? Any against? Thank you. And resolution 10, which is a special special resolution is the disapplication of preemption rights over the issue of shares up to 10% of the net ordinary share capital, net of treasury shares. All those in favor? Any against? Thank you. Resolution 11, which is also a special resolution, provides the company with the authority to buy back shares up to a maximum of 10% of the gross ordinary share capital of the company, including shares held in treasury, and that is under particular circumstances which is set out in the resolution and consistent with those in prior years.

22:21 All those in favor? Any against? Thank you. I declare all of the resolutions carried. We will make a suitable announcement under our MS to that effect in due course. Just highlight on the screen there other sources of information on the company. Obviously, you can access the company's website. You'll find links on that to a lot of video materials which explain the technology of the business very clearly. They're all fairly short available on our YouTube channel, and you're always welcome to contact us on investorrelations@transence.co.uk. Those that do use that email address to contact us, we are then asking if we can retain your details on file, and a number of people in the room have already taken advantage of that in order to be kept up to date with the company. And thank you very much for that.

23:14 I I do have another question that's of early interest to me, I expect. As I sit here, I'm not posting with everybody else posting. I have my shareholding in in nominee accounts as I expect most people here do, and I've been in creating shares for six years. So when originally, I you only voted if you have pieces of paper, if you have share certificates. Then they went to a stage when you had to get the letter from your nominee, and that was so complicated. As I was relieved when meetings at last allow people to come as an observer instead of a shareholder, which is how I've come to death.

23:59 Yes. Is it is it still the case that we need a letter if I'm going to vote? I feel a bit of a lemon that we're off voting and just being a. Well, firstly, under the circumstances you've just described, you're very welcome to attend and be treated like a shareholder like everybody else. It is extremely complex in trying to vote by proxy in many cases now, particularly if you have multiple accounts with different Yes. Nominees, and it's a bit of a minefield. Speaking personally, because my shares are partly in my name, partly in my wife's name, partly in my pension fund, and then split across ISIS as well, it becomes a bit of a nightmare trying to book by proxy for companies like TRANSENSE. Generally speaking, I manage that, but only by bullying the nominee into making sure that they communicate with me.

24:52 We did actually, as late as 03:15 yesterday, receive a proxy directly from a shareholder, which was nearly 5% of the shareholding. Yeah. Sure. And the registrar wouldn't accept it even when it's a permanent meeting. I said I was happy to do so. So it you it's becoming, sadly, like everything in life, a rules based system in which common sense doesn't apply anymore. So thank you. That made me sound like a really good kid. Probably because I That's a good question. That's a very good question. Well Fantastic, Nigel. And to the rest of the board, thank you for updating attendees today. On behalf of the management team of TRANSENSE TECHNOLOGIES PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.

25:39 Thank you very much. Hello?